Correlation Between Palfinger and Zumtobel Group

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

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

Diversification Opportunities for Palfinger and Zumtobel Group

0.26

Correlation Coefficient

Palfinger  Zumtobel Group

Modest diversification

The 3 months correlation between Palfinger and Zumtobel is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Palfinger AG and Zumtobel Group AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zumtobel Group AG and Palfinger 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 Palfinger AG are associated (or correlated) with Zumtobel Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zumtobel Group AG has no effect on the direction of Palfinger i.e., Palfinger and Zumtobel Group go up and down completely randomly.

Pair Corralation between Palfinger and Zumtobel Group

Assuming the 90 days trading horizon Palfinger AG is expected to generate 0.73 times more return on investment than Zumtobel Group. However, Palfinger AG is 1.37 times less risky than Zumtobel Group. It trades about 0.18 of its potential returns per unit of risk. Zumtobel Group AG is currently generating about -0.01 per unit of risk. If you would invest  2,275  in Palfinger AG on December 4, 2024 and sell it today you would earn a total of  105.00  from holding Palfinger AG or generate 4.62% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

Palfinger AG  vs.  Zumtobel Group AG

Palfinger AG

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Palfinger AG are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent essential indicators, Palfinger demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Zumtobel Group AG

Risk-Adjusted Performance

Very Weak

Over the last 90 days Zumtobel Group AG has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong technical and fundamental indicators, Zumtobel Group is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Palfinger and Zumtobel Group

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

The idea behind Palfinger AG and Zumtobel Group 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.