Correlation Between RATH Aktiengesellscha and Kapsch Traffic

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

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

Diversification Opportunities for RATH Aktiengesellscha and Kapsch Traffic

-0.12

Correlation Coefficient

RATH Aktiengesellscha  Kapsch Traffic

Good diversification

The 3 months correlation between RATH and Kapsch is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding RATH Aktiengesellschaft and Kapsch Traffic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kapsch Traffic and RATH 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 RATH Aktiengesellschaft are associated (or correlated) with Kapsch Traffic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kapsch Traffic has no effect on the direction of RATH Aktiengesellscha i.e., RATH Aktiengesellscha and Kapsch Traffic go up and down completely randomly.

Pair Corralation between RATH Aktiengesellscha and Kapsch Traffic

Assuming the 90 days trading horizon RATH Aktiengesellschaft is expected to under-perform the Kapsch Traffic. But the stock apears to be less risky and, when comparing its historical volatility, RATH Aktiengesellschaft is 2.86 times less risky than Kapsch Traffic. The stock trades about -0.09 of its potential returns per unit of risk. The Kapsch Traffic is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  584.00  in Kapsch Traffic on December 30, 2024 and sell it today you would earn a total of  126.00  from holding Kapsch Traffic or generate 21.58% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

RATH Aktiengesellschaft  vs.  Kapsch Traffic

RATH Aktiengesellschaft

Risk-Adjusted Performance

Very Weak

Over the last 90 days RATH Aktiengesellschaft has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, RATH Aktiengesellscha is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Kapsch Traffic

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Kapsch Traffic are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent forward indicators, Kapsch Traffic demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with RATH Aktiengesellscha and Kapsch Traffic

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

The idea behind RATH Aktiengesellschaft and Kapsch Traffic 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.