Correlation Between ModivCare and WashTec AG

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

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

Diversification Opportunities for ModivCare and WashTec AG

-0.17

Correlation Coefficient

ModivCare  WashTec AG

Good diversification

The 3 months correlation between ModivCare and WashTec is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding ModivCare and WashTec AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WashTec AG and ModivCare 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 ModivCare are associated (or correlated) with WashTec AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WashTec AG has no effect on the direction of ModivCare i.e., ModivCare and WashTec AG go up and down completely randomly.

Pair Corralation between ModivCare and WashTec AG

Given the investment horizon of 90 days ModivCare is expected to under-perform the WashTec AG. In addition to that, ModivCare is 2.19 times more volatile than WashTec AG. It trades about -0.04 of its total potential returns per unit of risk. WashTec AG is currently generating about 0.08 per unit of volatility. If you would invest  287.00  in WashTec AG on October 1, 2024 and sell it today you would earn a total of  202.00  from holding WashTec AG or generate 70.38% return on investment over 90 days.

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

ModivCare  vs.  WashTec AG

ModivCare

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ModivCare has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's fundamental indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

WashTec AG

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in WashTec AG are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak fundamental indicators, WashTec AG reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ModivCare and WashTec AG

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

The idea behind ModivCare and WashTec 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.

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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.