Correlation Between VAT Group and Lonza Group

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

Diversification Opportunities for VAT Group and Lonza Group

0.28

Correlation Coefficient

VAT Group  Lonza Group

Modest diversification

The 3 months correlation between VAT and Lonza is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding VAT Group AG and Lonza Group AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lonza Group 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 Lonza Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lonza Group AG has no effect on the direction of VAT Group i.e., VAT Group and Lonza Group go up and down completely randomly.

Pair Corralation between VAT Group and Lonza Group

Assuming the 90 days trading horizon VAT Group AG is expected to under-perform the Lonza Group. In addition to that, VAT Group is 1.73 times more volatile than Lonza Group AG. It trades about -0.02 of its total potential returns per unit of risk. Lonza Group AG is currently generating about 0.06 per unit of volatility. If you would invest  53,580  in Lonza Group AG on December 29, 2024 and sell it today you would earn a total of  2,480  from holding Lonza Group AG or generate 4.63% return on investment over 90 days.

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

VAT Group AG  vs.  Lonza Group 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.

Lonza Group AG

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Lonza Group AG are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Lonza Group 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 Lonza Group

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

The idea behind VAT Group AG and Lonza Group 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.