Correlation Between Ceconomy and Card Factory

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

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

Diversification Opportunities for Ceconomy and Card Factory

-0.52

Correlation Coefficient

Ceconomy  Card Factory

Excellent diversification

The 3 months correlation between Ceconomy and Card is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Ceconomy AG ADR and Card Factory plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Card Factory plc and Ceconomy 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 Ceconomy AG ADR are associated (or correlated) with Card Factory. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Card Factory plc has no effect on the direction of Ceconomy i.e., Ceconomy and Card Factory go up and down completely randomly.

Pair Corralation between Ceconomy and Card Factory

Assuming the 90 days horizon Ceconomy AG ADR is expected to generate 1.02 times more return on investment than Card Factory. However, Ceconomy is 1.02 times more volatile than Card Factory plc. It trades about 0.04 of its potential returns per unit of risk. Card Factory plc is currently generating about 0.01 per unit of risk. If you would invest  59.00  in Ceconomy AG ADR on November 28, 2024 and sell it today you would earn a total of  3.00  from holding Ceconomy AG ADR or generate 5.08% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	93.55%
Values	Daily Returns

Ceconomy AG ADR  vs.  Card Factory plc

Ceconomy AG ADR

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Ceconomy AG ADR are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Ceconomy showed solid returns over the last few months and may actually be approaching a breakup point.

Card Factory plc

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Card Factory plc are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable fundamental indicators, Card Factory is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Ceconomy and Card Factory

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

The idea behind Ceconomy AG ADR and Card Factory plc 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.