Correlation Between Plug Power and Varta AG

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

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

Diversification Opportunities for Plug Power and Varta AG

-0.32

Correlation Coefficient

Plug Power  Varta AG

Very good diversification

The 3 months correlation between Plug and Varta is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Plug Power and Varta AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Varta AG and Plug Power 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 Plug Power are associated (or correlated) with Varta AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Varta AG has no effect on the direction of Plug Power i.e., Plug Power and Varta AG go up and down completely randomly.

Pair Corralation between Plug Power and Varta AG

Assuming the 90 days trading horizon Plug Power is expected to generate 1.33 times more return on investment than Varta AG. However, Plug Power is 1.33 times more volatile than Varta AG. It trades about 0.08 of its potential returns per unit of risk. Varta AG is currently generating about -0.33 per unit of risk. If you would invest  207.00  in Plug Power on September 26, 2024 and sell it today you would earn a total of  31.00  from holding Plug Power or generate 14.98% return on investment over 90 days.

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

Plug Power  vs.  Varta AG

Plug Power

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Plug Power are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, Plug Power exhibited solid returns over the last few months and may actually be approaching a breakup point.

Varta AG

Risk-Adjusted Performance

5 of 100

Modest

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

Pair Trading with Plug Power and Varta AG

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

The idea behind Plug Power and Varta 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.