Correlation Between VAT Group and EMS CHEMIE

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

Diversification Opportunities for VAT Group and EMS CHEMIE

0.82

Correlation Coefficient

VAT Group  EMS CHEMIE

Very poor diversification

The 3 months correlation between VAT and EMS is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding VAT Group AG and EMS CHEMIE HOLDING AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EMS CHEMIE 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 EMS CHEMIE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EMS CHEMIE HOLDING has no effect on the direction of VAT Group i.e., VAT Group and EMS CHEMIE go up and down completely randomly.

Pair Corralation between VAT Group and EMS CHEMIE

Assuming the 90 days trading horizon VAT Group AG is expected to under-perform the EMS CHEMIE. In addition to that, VAT Group is 2.19 times more volatile than EMS CHEMIE HOLDING AG. It trades about -0.18 of its total potential returns per unit of risk. EMS CHEMIE HOLDING AG is currently generating about -0.24 per unit of volatility. If you would invest  69,350  in EMS CHEMIE HOLDING AG on October 3, 2024 and sell it today you would lose (8,200) from holding EMS CHEMIE HOLDING AG or give up 11.82% of portfolio value over 90 days.

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

VAT Group AG  vs.  EMS CHEMIE HOLDING AG

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 abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in February 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

EMS CHEMIE HOLDING

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days EMS CHEMIE HOLDING AG has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in February 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with VAT Group and EMS CHEMIE

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

The idea behind VAT Group AG and EMS CHEMIE HOLDING 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.

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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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.