Correlation Between VAT Group and Clariant

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

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

Diversification Opportunities for VAT Group and Clariant

0.47

Correlation Coefficient

VAT Group  Clariant

Very weak diversification

The 3 months correlation between VAT and Clariant is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding VAT Group AG and Clariant AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Clariant AG and VAT Group 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 VAT Group AG are associated (or correlated) with Clariant. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Clariant AG has no effect on the direction of VAT Group i.e., VAT Group and Clariant go up and down completely randomly.

Pair Corralation between VAT Group and Clariant

Assuming the 90 days trading horizon VAT Group AG is expected to under-perform the Clariant. In addition to that, VAT Group is 1.09 times more volatile than Clariant AG. It trades about -0.02 of its total potential returns per unit of risk. Clariant AG is currently generating about -0.01 per unit of volatility. If you would invest  1,009  in Clariant AG on December 30, 2024 and sell it today you would lose (28.00) from holding Clariant AG or give up 2.78% of portfolio value over 90 days.

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

VAT Group AG  vs.  Clariant AG

VAT Group AG

Risk-Adjusted Performance

Very Weak

Over the last 90 days VAT Group AG has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, VAT Group is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Clariant AG

Risk-Adjusted Performance

Very Weak

Over the last 90 days Clariant AG has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Clariant is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with VAT Group and Clariant

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

The idea behind VAT Group AG and Clariant 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.

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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.