Correlation Between Industrial and EVN AG

Can any of the company-specific risk be diversified away by investing in both Industrial and EVN AG at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Industrial and EVN AG into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Industrial and Commercial and EVN AG, you can compare the effects of market volatilities on Industrial and EVN AG and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Industrial with a short position of EVN AG. Check out your portfolio center. Please also check ongoing floating volatility patterns of Industrial and EVN AG.

Diversification Opportunities for Industrial and EVN AG

-0.69

Correlation Coefficient

Industrial  EVN AG

Excellent diversification

The 3 months correlation between Industrial and EVN is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Industrial and Commercial and EVN AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EVN AG and Industrial is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Industrial and Commercial are associated (or correlated) with EVN AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EVN AG has no effect on the direction of Industrial i.e., Industrial and EVN AG go up and down completely randomly.

Pair Corralation between Industrial and EVN AG

Assuming the 90 days horizon Industrial and Commercial is expected to generate 1.42 times more return on investment than EVN AG. However, Industrial is 1.42 times more volatile than EVN AG. It trades about 0.01 of its potential returns per unit of risk. EVN AG is currently generating about -0.36 per unit of risk. If you would invest  59.00  in Industrial and Commercial on September 22, 2024 and sell it today you would earn a total of  0.00  from holding Industrial and Commercial or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Industrial and Commercial  vs.  EVN AG

Industrial and Commercial

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Industrial and Commercial are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Industrial reported solid returns over the last few months and may actually be approaching a breakup point.

EVN AG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days EVN AG has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Industrial and EVN AG

The main advantage of trading using opposite Industrial and EVN AG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Industrial position performs unexpectedly, EVN AG can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in EVN AG will offset losses from the drop in EVN AG's long position.

The idea behind Industrial and Commercial and EVN AG pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.