Correlation Between UmweltBank and Corporate Travel

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

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

Diversification Opportunities for UmweltBank and Corporate Travel

0.7

Correlation Coefficient

UmweltBank  Corporate Travel

Poor diversification

The 3 months correlation between UmweltBank and Corporate is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding UmweltBank AG and Corporate Travel Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Corporate Travel Man and UmweltBank 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 UmweltBank AG are associated (or correlated) with Corporate Travel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Corporate Travel Man has no effect on the direction of UmweltBank i.e., UmweltBank and Corporate Travel go up and down completely randomly.

Pair Corralation between UmweltBank and Corporate Travel

Assuming the 90 days trading horizon UmweltBank is expected to generate 4.54 times less return on investment than Corporate Travel. But when comparing it to its historical volatility, UmweltBank AG is 1.37 times less risky than Corporate Travel. It trades about 0.05 of its potential returns per unit of risk. Corporate Travel Management is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  685.00  in Corporate Travel Management on October 25, 2024 and sell it today you would earn a total of  185.00  from holding Corporate Travel Management or generate 27.01% return on investment over 90 days.

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

UmweltBank AG  vs.  Corporate Travel Management

UmweltBank AG

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in UmweltBank AG are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, UmweltBank is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Corporate Travel Man

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Corporate Travel Management are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Corporate Travel unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with UmweltBank and Corporate Travel

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

The idea behind UmweltBank AG and Corporate Travel Management 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.