Correlation Between Penta-Ocean Construction and Varta AG

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

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

Diversification Opportunities for Penta-Ocean Construction and Varta AG

-0.17

Correlation Coefficient

Penta-Ocean Construction  Varta AG

Good diversification

The 3 months correlation between Penta-Ocean and Varta is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Penta Ocean Construction Co and Varta AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Varta AG and Penta-Ocean Construction 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 Penta Ocean Construction Co 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 Penta-Ocean Construction i.e., Penta-Ocean Construction and Varta AG go up and down completely randomly.

Pair Corralation between Penta-Ocean Construction and Varta AG

Assuming the 90 days horizon Penta Ocean Construction Co is expected to generate 0.15 times more return on investment than Varta AG. However, Penta Ocean Construction Co is 6.87 times less risky than Varta AG. It trades about -0.05 of its potential returns per unit of risk. Varta AG is currently generating about -0.02 per unit of risk. If you would invest  510.00  in Penta Ocean Construction Co on October 9, 2024 and sell it today you would lose (110.00) from holding Penta Ocean Construction Co or give up 21.57% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.6%
Values	Daily Returns

Penta Ocean Construction Co  vs.  Varta AG

Penta-Ocean Construction

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Penta Ocean Construction Co are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Penta-Ocean Construction is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Varta AG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Varta AG has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Penta-Ocean Construction and Varta AG

The main advantage of trading using opposite Penta-Ocean Construction and Varta AG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Penta-Ocean Construction 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 Penta Ocean Construction Co 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.

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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.