Correlation Between OSRAM LICHT and GrafTech International

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

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

Diversification Opportunities for OSRAM LICHT and GrafTech International

0.73

Correlation Coefficient

OSRAM LICHT  GrafTech International

Poor diversification

The 3 months correlation between OSRAM and GrafTech is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding OSRAM LICHT N and GrafTech International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GrafTech International and OSRAM LICHT 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 OSRAM LICHT N are associated (or correlated) with GrafTech International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GrafTech International has no effect on the direction of OSRAM LICHT i.e., OSRAM LICHT and GrafTech International go up and down completely randomly.

Pair Corralation between OSRAM LICHT and GrafTech International

Assuming the 90 days trading horizon OSRAM LICHT is expected to generate 3.35 times less return on investment than GrafTech International. But when comparing it to its historical volatility, OSRAM LICHT N is 25.67 times less risky than GrafTech International. It trades about 0.19 of its potential returns per unit of risk. GrafTech International is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  157.00  in GrafTech International on September 23, 2024 and sell it today you would lose (2.00) from holding GrafTech International or give up 1.27% of portfolio value over 90 days.

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

OSRAM LICHT N  vs.  GrafTech International

OSRAM LICHT N

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in OSRAM LICHT N are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, OSRAM LICHT is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

GrafTech International

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in GrafTech International are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, GrafTech International reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with OSRAM LICHT and GrafTech International

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

The idea behind OSRAM LICHT N and GrafTech International 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.