Correlation Between INTERSHOP Communications and USWE SPORTS

Can any of the company-specific risk be diversified away by investing in both INTERSHOP Communications and USWE SPORTS 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 INTERSHOP Communications and USWE SPORTS into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between INTERSHOP Communications Aktiengesellschaft and USWE SPORTS AB, you can compare the effects of market volatilities on INTERSHOP Communications and USWE SPORTS 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 INTERSHOP Communications with a short position of USWE SPORTS. Check out your portfolio center. Please also check ongoing floating volatility patterns of INTERSHOP Communications and USWE SPORTS.

Diversification Opportunities for INTERSHOP Communications and USWE SPORTS

0.58

Correlation Coefficient

INTERSHOP Communications  USWE SPORTS

Very weak diversification

The 3 months correlation between INTERSHOP and USWE is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding INTERSHOP Communications Aktie and USWE SPORTS AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on USWE SPORTS AB and INTERSHOP Communications 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 INTERSHOP Communications Aktiengesellschaft are associated (or correlated) with USWE SPORTS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of USWE SPORTS AB has no effect on the direction of INTERSHOP Communications i.e., INTERSHOP Communications and USWE SPORTS go up and down completely randomly.

Pair Corralation between INTERSHOP Communications and USWE SPORTS

Assuming the 90 days trading horizon INTERSHOP Communications Aktiengesellschaft is expected to generate 0.69 times more return on investment than USWE SPORTS. However, INTERSHOP Communications Aktiengesellschaft is 1.44 times less risky than USWE SPORTS. It trades about -0.02 of its potential returns per unit of risk. USWE SPORTS AB is currently generating about -0.02 per unit of risk. If you would invest  284.00  in INTERSHOP Communications Aktiengesellschaft on October 10, 2024 and sell it today you would lose (102.00) from holding INTERSHOP Communications Aktiengesellschaft or give up 35.92% of portfolio value over 90 days.

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

INTERSHOP Communications Aktie  vs.  USWE SPORTS AB

INTERSHOP Communications

Risk-Adjusted Performance

6 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in INTERSHOP Communications Aktiengesellschaft are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, INTERSHOP Communications exhibited solid returns over the last few months and may actually be approaching a breakup point.

USWE SPORTS AB

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in USWE SPORTS AB are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, USWE SPORTS reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with INTERSHOP Communications and USWE SPORTS

The main advantage of trading using opposite INTERSHOP Communications and USWE SPORTS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if INTERSHOP Communications position performs unexpectedly, USWE SPORTS 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 USWE SPORTS will offset losses from the drop in USWE SPORTS's long position.

The idea behind INTERSHOP Communications Aktiengesellschaft and USWE SPORTS AB 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.

Check out your portfolio center.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.