Correlation Between China International and Thyssenkrupp

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

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

Diversification Opportunities for China International and Thyssenkrupp

-0.25

Correlation Coefficient

China International  Thyssenkrupp

Very good diversification

The 3 months correlation between China and Thyssenkrupp is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding China International Marine and thyssenkrupp AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on thyssenkrupp AG and China International 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 China International Marine 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 China International i.e., China International and Thyssenkrupp go up and down completely randomly.

Pair Corralation between China International and Thyssenkrupp

Assuming the 90 days horizon China International Marine is expected to under-perform the Thyssenkrupp. But the stock apears to be less risky and, when comparing its historical volatility, China International Marine is 1.11 times less risky than Thyssenkrupp. The stock trades about -0.05 of its potential returns per unit of risk. The thyssenkrupp AG is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  366.00  in thyssenkrupp AG on September 28, 2024 and sell it today you would earn a total of  18.00  from holding thyssenkrupp AG or generate 4.92% return on investment over 90 days.

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

China International Marine  vs.  thyssenkrupp AG

China International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China International Marine has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, China International is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

thyssenkrupp AG

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in thyssenkrupp AG are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Thyssenkrupp unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with China International and Thyssenkrupp

The main advantage of trading using opposite China International and Thyssenkrupp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China International 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 China International Marine 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.

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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.