Correlation Between Polytec Holding and Voestalpine

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

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

Diversification Opportunities for Polytec Holding and Voestalpine

0.9

Correlation Coefficient

Polytec Holding  Voestalpine

Almost no diversification

The 3 months correlation between Polytec and Voestalpine is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Polytec Holding AG and Voestalpine AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Voestalpine AG and Polytec Holding 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 Polytec Holding AG are associated (or correlated) with Voestalpine. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Voestalpine AG has no effect on the direction of Polytec Holding i.e., Polytec Holding and Voestalpine go up and down completely randomly.

Pair Corralation between Polytec Holding and Voestalpine

Assuming the 90 days trading horizon Polytec Holding AG is expected to generate 1.02 times more return on investment than Voestalpine. However, Polytec Holding is 1.02 times more volatile than Voestalpine AG. It trades about 0.22 of its potential returns per unit of risk. Voestalpine AG is currently generating about 0.22 per unit of risk. If you would invest  206.00  in Polytec Holding AG on December 24, 2024 and sell it today you would earn a total of  80.00  from holding Polytec Holding AG or generate 38.83% return on investment over 90 days.

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

Polytec Holding AG  vs.  Voestalpine AG

Polytec Holding AG

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Polytec Holding AG are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent basic indicators, Polytec Holding demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Voestalpine AG

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Voestalpine AG are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent technical and fundamental indicators, Voestalpine demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Polytec Holding and Voestalpine

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

The idea behind Polytec Holding AG and Voestalpine 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.