Correlation Between UmweltBank and LEGACY IRON

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

By analyzing existing cross correlation between UmweltBank AG and LEGACY IRON ORE, you can compare the effects of market volatilities on UmweltBank and LEGACY IRON 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 LEGACY IRON. Check out your portfolio center. Please also check ongoing floating volatility patterns of UmweltBank and LEGACY IRON.

Diversification Opportunities for UmweltBank and LEGACY IRON

-0.7

Correlation Coefficient

UmweltBank  LEGACY IRON

Excellent diversification

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

Pair Corralation between UmweltBank and LEGACY IRON

Assuming the 90 days trading horizon UmweltBank AG is expected to generate 1.67 times more return on investment than LEGACY IRON. However, UmweltBank is 1.67 times more volatile than LEGACY IRON ORE. It trades about 0.17 of its potential returns per unit of risk. LEGACY IRON ORE is currently generating about -0.13 per unit of risk. If you would invest  512.00  in UmweltBank AG on October 9, 2024 and sell it today you would earn a total of  108.00  from holding UmweltBank AG or generate 21.09% return on investment over 90 days.

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

UmweltBank AG  vs.  LEGACY IRON ORE

UmweltBank AG

Risk-Adjusted Performance

13 of 100

Good

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

LEGACY IRON ORE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LEGACY IRON ORE has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with UmweltBank and LEGACY IRON

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

The idea behind UmweltBank AG and LEGACY IRON ORE 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.

Check out your portfolio center.

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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.