Correlation Between Symrise Ag and Covestro ADR

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

By analyzing existing cross correlation between Symrise Ag PK and Covestro ADR, you can compare the effects of market volatilities on Symrise Ag and Covestro ADR 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 Symrise Ag with a short position of Covestro ADR. Check out your portfolio center. Please also check ongoing floating volatility patterns of Symrise Ag and Covestro ADR.

Diversification Opportunities for Symrise Ag and Covestro ADR

0.64

Correlation Coefficient

Symrise Ag  Covestro ADR

Poor diversification

The 3 months correlation between Symrise and Covestro is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Symrise Ag PK and Covestro ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Covestro ADR and Symrise Ag 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 Symrise Ag PK are associated (or correlated) with Covestro ADR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Covestro ADR has no effect on the direction of Symrise Ag i.e., Symrise Ag and Covestro ADR go up and down completely randomly.

Pair Corralation between Symrise Ag and Covestro ADR

Assuming the 90 days horizon Symrise Ag is expected to generate 5.8 times less return on investment than Covestro ADR. In addition to that, Symrise Ag is 2.57 times more volatile than Covestro ADR. It trades about 0.03 of its total potential returns per unit of risk. Covestro ADR is currently generating about 0.39 per unit of volatility. If you would invest  2,933  in Covestro ADR on November 20, 2024 and sell it today you would earn a total of  137.00  from holding Covestro ADR or generate 4.67% return on investment over 90 days.

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

Symrise Ag PK  vs.  Covestro ADR

Symrise Ag PK

Risk-Adjusted Performance

Very Weak

Over the last 90 days Symrise Ag PK has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical and fundamental indicators, Symrise Ag is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Covestro ADR

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Covestro ADR are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Covestro ADR is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Symrise Ag and Covestro ADR

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

The idea behind Symrise Ag PK and Covestro ADR 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.