Correlation Between SEIKO EPSON and Mhlbauer Holding

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

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

Diversification Opportunities for SEIKO EPSON and Mhlbauer Holding

0.22

Correlation Coefficient

SEIKO EPSON  Mhlbauer Holding

Modest diversification

The 3 months correlation between SEIKO and Mhlbauer is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding SEIKO EPSON PADR and Mhlbauer Holding AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mhlbauer Holding and SEIKO EPSON 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 SEIKO EPSON PADR are associated (or correlated) with Mhlbauer Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mhlbauer Holding has no effect on the direction of SEIKO EPSON i.e., SEIKO EPSON and Mhlbauer Holding go up and down completely randomly.

Pair Corralation between SEIKO EPSON and Mhlbauer Holding

Assuming the 90 days trading horizon SEIKO EPSON PADR is expected to generate 1.39 times more return on investment than Mhlbauer Holding. However, SEIKO EPSON is 1.39 times more volatile than Mhlbauer Holding AG. It trades about 0.06 of its potential returns per unit of risk. Mhlbauer Holding AG is currently generating about -0.09 per unit of risk. If you would invest  805.00  in SEIKO EPSON PADR on September 27, 2024 and sell it today you would earn a total of  40.00  from holding SEIKO EPSON PADR or generate 4.97% return on investment over 90 days.

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

SEIKO EPSON PADR  vs.  Mhlbauer Holding AG

SEIKO EPSON PADR

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in SEIKO EPSON PADR are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, SEIKO EPSON is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Mhlbauer Holding

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with SEIKO EPSON and Mhlbauer Holding

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

The idea behind SEIKO EPSON PADR and Mhlbauer Holding 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.