Correlation Between Mühlbauer Holding and Eurotech SpA

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

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

Diversification Opportunities for Mühlbauer Holding and Eurotech SpA

0.9

Correlation Coefficient

Mühlbauer Holding  Eurotech SpA

Almost no diversification

The 3 months correlation between Mühlbauer and Eurotech is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Mhlbauer Holding AG and Eurotech SpA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eurotech SpA and Mühlbauer Holding 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 Mhlbauer Holding AG are associated (or correlated) with Eurotech SpA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eurotech SpA has no effect on the direction of Mühlbauer Holding i.e., Mühlbauer Holding and Eurotech SpA go up and down completely randomly.

Pair Corralation between Mühlbauer Holding and Eurotech SpA

Assuming the 90 days trading horizon Mhlbauer Holding AG is expected to generate 0.54 times more return on investment than Eurotech SpA. However, Mhlbauer Holding AG is 1.86 times less risky than Eurotech SpA. It trades about -0.24 of its potential returns per unit of risk. Eurotech SpA is currently generating about -0.21 per unit of risk. If you would invest  5,200  in Mhlbauer Holding AG on September 2, 2024 and sell it today you would lose (1,440) from holding Mhlbauer Holding AG or give up 27.69% of portfolio value over 90 days.

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

Mhlbauer Holding AG  vs.  Eurotech SpA

Mühlbauer Holding

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mhlbauer Holding AG has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's fundamental drivers remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Eurotech SpA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eurotech SpA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Mühlbauer Holding and Eurotech SpA

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

The idea behind Mhlbauer Holding AG and Eurotech SpA 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.