Correlation Between Metall Zug and Zuger Kantonalbank

Can any of the company-specific risk be diversified away by investing in both Metall Zug and Zuger Kantonalbank 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 Metall Zug and Zuger Kantonalbank into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Metall Zug and Zuger Kantonalbank

0.72

Correlation Coefficient

Metall Zug  Zuger Kantonalbank

Poor diversification

The 3 months correlation between Metall and Zuger is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Metall Zug AG and Zuger Kantonalbank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zuger Kantonalbank and Metall Zug 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 Metall Zug AG are associated (or correlated) with Zuger Kantonalbank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zuger Kantonalbank has no effect on the direction of Metall Zug i.e., Metall Zug and Zuger Kantonalbank go up and down completely randomly.

Pair Corralation between Metall Zug and Zuger Kantonalbank

Assuming the 90 days trading horizon Metall Zug AG is expected to under-perform the Zuger Kantonalbank. In addition to that, Metall Zug is 3.26 times more volatile than Zuger Kantonalbank. It trades about -0.05 of its total potential returns per unit of risk. Zuger Kantonalbank is currently generating about -0.08 per unit of volatility. If you would invest  834,000  in Zuger Kantonalbank on September 4, 2024 and sell it today you would lose (20,000) from holding Zuger Kantonalbank or give up 2.4% of portfolio value over 90 days.

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

Metall Zug AG  vs.  Zuger Kantonalbank

Metall Zug AG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Metall Zug AG has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Metall Zug is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Zuger Kantonalbank

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Zuger Kantonalbank has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Zuger Kantonalbank is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Metall Zug and Zuger Kantonalbank

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

The idea behind Metall Zug AG and Zuger Kantonalbank 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.