Correlation Between PG E and Commerzbank

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

By analyzing existing cross correlation between PG E P6 and Commerzbank AG, you can compare the effects of market volatilities on PG E and Commerzbank 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 PG E with a short position of Commerzbank. Check out your portfolio center. Please also check ongoing floating volatility patterns of PG E and Commerzbank.

Diversification Opportunities for PG E and Commerzbank

-0.54

Correlation Coefficient

PG E  Commerzbank

Excellent diversification

The 3 months correlation between PCG6 and Commerzbank is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding PG E P6 and Commerzbank AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Commerzbank AG and PG E 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 PG E P6 are associated (or correlated) with Commerzbank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Commerzbank AG has no effect on the direction of PG E i.e., PG E and Commerzbank go up and down completely randomly.

Pair Corralation between PG E and Commerzbank

Assuming the 90 days trading horizon PG E P6 is expected to generate 0.68 times more return on investment than Commerzbank. However, PG E P6 is 1.47 times less risky than Commerzbank. It trades about 0.08 of its potential returns per unit of risk. Commerzbank AG is currently generating about 0.04 per unit of risk. If you would invest  2,064  in PG E P6 on September 23, 2024 and sell it today you would earn a total of  116.00  from holding PG E P6 or generate 5.62% return on investment over 90 days.

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

PG E P6  vs.  Commerzbank AG

PG E P6

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in PG E P6 are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, PG E is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Commerzbank AG

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Commerzbank AG are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable forward-looking signals, Commerzbank is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with PG E and Commerzbank

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

The idea behind PG E P6 and Commerzbank 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.