Correlation Between Transport International and VERBUND AG

Can any of the company-specific risk be diversified away by investing in both Transport International and VERBUND 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 Transport International and VERBUND AG into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Transport International Holdings and VERBUND AG, you can compare the effects of market volatilities on Transport International and VERBUND 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 Transport International with a short position of VERBUND AG. Check out your portfolio center. Please also check ongoing floating volatility patterns of Transport International and VERBUND AG.

Diversification Opportunities for Transport International and VERBUND AG

0.12

Correlation Coefficient

Transport International  VERBUND AG

Average diversification

The 3 months correlation between Transport and VERBUND is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Transport International Holdin and VERBUND AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VERBUND AG and Transport International 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 Transport International Holdings are associated (or correlated) with VERBUND AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VERBUND AG has no effect on the direction of Transport International i.e., Transport International and VERBUND AG go up and down completely randomly.

Pair Corralation between Transport International and VERBUND AG

Assuming the 90 days horizon Transport International Holdings is expected to under-perform the VERBUND AG. In addition to that, Transport International is 1.03 times more volatile than VERBUND AG. It trades about -0.03 of its total potential returns per unit of risk. VERBUND AG is currently generating about 0.0 per unit of volatility. If you would invest  7,340  in VERBUND AG on October 9, 2024 and sell it today you would lose (65.00) from holding VERBUND AG or give up 0.89% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

Transport International Holdin  vs.  VERBUND AG

Transport International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Transport International Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Transport International is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

VERBUND AG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days VERBUND AG has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, VERBUND AG is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Transport International and VERBUND AG

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

The idea behind Transport International Holdings and VERBUND 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.