Correlation Between FIREWEED METALS and Deutsche Lufthansa

Can any of the company-specific risk be diversified away by investing in both FIREWEED METALS and Deutsche Lufthansa 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 FIREWEED METALS and Deutsche Lufthansa into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between FIREWEED METALS P and Deutsche Lufthansa AG, you can compare the effects of market volatilities on FIREWEED METALS and Deutsche Lufthansa 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 FIREWEED METALS with a short position of Deutsche Lufthansa. Check out your portfolio center. Please also check ongoing floating volatility patterns of FIREWEED METALS and Deutsche Lufthansa.

Diversification Opportunities for FIREWEED METALS and Deutsche Lufthansa

-0.05

Correlation Coefficient

FIREWEED METALS  Deutsche Lufthansa

Good diversification

The 3 months correlation between FIREWEED and Deutsche is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding FIREWEED METALS P and Deutsche Lufthansa AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Deutsche Lufthansa and FIREWEED METALS 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 FIREWEED METALS P are associated (or correlated) with Deutsche Lufthansa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Deutsche Lufthansa has no effect on the direction of FIREWEED METALS i.e., FIREWEED METALS and Deutsche Lufthansa go up and down completely randomly.

Pair Corralation between FIREWEED METALS and Deutsche Lufthansa

Assuming the 90 days horizon FIREWEED METALS P is expected to generate 1.19 times more return on investment than Deutsche Lufthansa. However, FIREWEED METALS is 1.19 times more volatile than Deutsche Lufthansa AG. It trades about 0.15 of its potential returns per unit of risk. Deutsche Lufthansa AG is currently generating about -0.09 per unit of risk. If you would invest  93.00  in FIREWEED METALS P on October 25, 2024 and sell it today you would earn a total of  5.00  from holding FIREWEED METALS P or generate 5.38% return on investment over 90 days.

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

FIREWEED METALS P  vs.  Deutsche Lufthansa AG

FIREWEED METALS P

Risk-Adjusted Performance

0 of 100

Very Weak

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

Deutsche Lufthansa

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Deutsche Lufthansa AG has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with FIREWEED METALS and Deutsche Lufthansa

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

The idea behind FIREWEED METALS P and Deutsche Lufthansa 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.