Correlation Between ITALIAN WINE and Thyssenkrupp

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

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

Diversification Opportunities for ITALIAN WINE and Thyssenkrupp

0.42

Correlation Coefficient

ITALIAN WINE  Thyssenkrupp

Very weak diversification

The 3 months correlation between ITALIAN and Thyssenkrupp is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding ITALIAN WINE BRANDS and thyssenkrupp AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on thyssenkrupp AG and ITALIAN WINE 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 ITALIAN WINE BRANDS are associated (or correlated) with Thyssenkrupp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of thyssenkrupp AG has no effect on the direction of ITALIAN WINE i.e., ITALIAN WINE and Thyssenkrupp go up and down completely randomly.

Pair Corralation between ITALIAN WINE and Thyssenkrupp

Assuming the 90 days horizon ITALIAN WINE is expected to generate 2.91 times less return on investment than Thyssenkrupp. But when comparing it to its historical volatility, ITALIAN WINE BRANDS is 1.16 times less risky than Thyssenkrupp. It trades about 0.06 of its potential returns per unit of risk. thyssenkrupp AG is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  305.00  in thyssenkrupp AG on September 5, 2024 and sell it today you would earn a total of  86.00  from holding thyssenkrupp AG or generate 28.2% return on investment over 90 days.

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

ITALIAN WINE BRANDS  vs.  thyssenkrupp AG

ITALIAN WINE BRANDS

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ITALIAN WINE BRANDS are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, ITALIAN WINE may actually be approaching a critical reversion point that can send shares even higher in January 2025.

thyssenkrupp AG

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in thyssenkrupp AG are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Thyssenkrupp reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ITALIAN WINE and Thyssenkrupp

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

The idea behind ITALIAN WINE BRANDS and thyssenkrupp 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.