Correlation Between PVA TePla and American Superconductor

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

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

Diversification Opportunities for PVA TePla and American Superconductor

-0.76

Correlation Coefficient

PVA TePla  American Superconductor

Pay attention - limited upside

The 3 months correlation between PVA and American is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding PVA TePla AG and American Superconductor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Superconductor and PVA TePla 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 PVA TePla AG are associated (or correlated) with American Superconductor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Superconductor has no effect on the direction of PVA TePla i.e., PVA TePla and American Superconductor go up and down completely randomly.

Pair Corralation between PVA TePla and American Superconductor

Assuming the 90 days horizon PVA TePla AG is expected to generate 0.57 times more return on investment than American Superconductor. However, PVA TePla AG is 1.76 times less risky than American Superconductor. It trades about 0.22 of its potential returns per unit of risk. American Superconductor is currently generating about -0.29 per unit of risk. If you would invest  1,282  in PVA TePla AG on September 25, 2024 and sell it today you would earn a total of  164.00  from holding PVA TePla AG or generate 12.79% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.24%
Values	Daily Returns

PVA TePla AG  vs.  American Superconductor

PVA TePla AG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PVA TePla AG has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's forward-looking signals remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

American Superconductor

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in American Superconductor are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, American Superconductor exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PVA TePla and American Superconductor

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

The idea behind PVA TePla AG and American Superconductor 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.