Correlation Between VAT Group and Dorma Kaba

Can any of the company-specific risk be diversified away by investing in both VAT Group and Dorma Kaba 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 Dorma Kaba 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 Dorma Kaba Holding, you can compare the effects of market volatilities on VAT Group and Dorma Kaba 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 Dorma Kaba. Check out your portfolio center. Please also check ongoing floating volatility patterns of VAT Group and Dorma Kaba.

Diversification Opportunities for VAT Group and Dorma Kaba

-0.8

Correlation Coefficient

VAT Group  Dorma Kaba

Pay attention - limited upside

The 3 months correlation between VAT and Dorma is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding VAT Group AG and Dorma Kaba Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dorma Kaba Holding 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 Dorma Kaba. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dorma Kaba Holding has no effect on the direction of VAT Group i.e., VAT Group and Dorma Kaba go up and down completely randomly.

Pair Corralation between VAT Group and Dorma Kaba

Assuming the 90 days trading horizon VAT Group AG is expected to under-perform the Dorma Kaba. In addition to that, VAT Group is 1.44 times more volatile than Dorma Kaba Holding. It trades about -0.05 of its total potential returns per unit of risk. Dorma Kaba Holding is currently generating about 0.26 per unit of volatility. If you would invest  48,666  in Dorma Kaba Holding on September 5, 2024 and sell it today you would earn a total of  17,234  from holding Dorma Kaba Holding or generate 35.41% return on investment over 90 days.

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

VAT Group AG  vs.  Dorma Kaba Holding

VAT Group AG

Risk-Adjusted Performance

0 of 100

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 latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Dorma Kaba Holding

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Dorma Kaba Holding are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Dorma Kaba showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with VAT Group and Dorma Kaba

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

The idea behind VAT Group AG and Dorma Kaba Holding 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.