Correlation Between RATIONAL Aktiengesellscha and Vestas Wind

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

By analyzing existing cross correlation between RATIONAL Aktiengesellschaft and Vestas Wind Systems, you can compare the effects of market volatilities on RATIONAL Aktiengesellscha and Vestas Wind 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 RATIONAL Aktiengesellscha with a short position of Vestas Wind. Check out your portfolio center. Please also check ongoing floating volatility patterns of RATIONAL Aktiengesellscha and Vestas Wind.

Diversification Opportunities for RATIONAL Aktiengesellscha and Vestas Wind

0.68

Correlation Coefficient

RATIONAL Aktiengesellscha  Vestas Wind

Poor diversification

The 3 months correlation between RATIONAL and Vestas is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding RATIONAL Aktiengesellschaft and Vestas Wind Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vestas Wind Systems and RATIONAL Aktiengesellscha 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 RATIONAL Aktiengesellschaft are associated (or correlated) with Vestas Wind. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vestas Wind Systems has no effect on the direction of RATIONAL Aktiengesellscha i.e., RATIONAL Aktiengesellscha and Vestas Wind go up and down completely randomly.

Pair Corralation between RATIONAL Aktiengesellscha and Vestas Wind

Assuming the 90 days trading horizon RATIONAL Aktiengesellschaft is expected to generate 0.38 times more return on investment than Vestas Wind. However, RATIONAL Aktiengesellschaft is 2.65 times less risky than Vestas Wind. It trades about -0.14 of its potential returns per unit of risk. Vestas Wind Systems is currently generating about -0.13 per unit of risk. If you would invest  91,550  in RATIONAL Aktiengesellschaft on October 15, 2024 and sell it today you would lose (9,800) from holding RATIONAL Aktiengesellschaft or give up 10.7% of portfolio value over 90 days.

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

RATIONAL Aktiengesellschaft  vs.  Vestas Wind Systems

RATIONAL Aktiengesellscha

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days RATIONAL Aktiengesellschaft has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Vestas Wind Systems

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vestas Wind Systems 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 fundamental drivers 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 RATIONAL Aktiengesellscha and Vestas Wind

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

The idea behind RATIONAL Aktiengesellschaft and Vestas Wind Systems 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.