Correlation Between Varta AG and Encavis AG

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

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

Diversification Opportunities for Varta AG and Encavis AG

0.15

Correlation Coefficient

Varta AG  Encavis AG

Average diversification

The 3 months correlation between Varta and Encavis is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Varta AG and Encavis AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Encavis AG and Varta AG 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 Varta AG are associated (or correlated) with Encavis AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Encavis AG has no effect on the direction of Varta AG i.e., Varta AG and Encavis AG go up and down completely randomly.

Pair Corralation between Varta AG and Encavis AG

Assuming the 90 days trading horizon Varta AG is expected to generate 41.64 times more return on investment than Encavis AG. However, Varta AG is 41.64 times more volatile than Encavis AG. It trades about 0.09 of its potential returns per unit of risk. Encavis AG is currently generating about 0.09 per unit of risk. If you would invest  150.00  in Varta AG on September 12, 2024 and sell it today you would earn a total of  40.00  from holding Varta AG or generate 26.67% return on investment over 90 days.

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

Varta AG  vs.  Encavis AG

Varta AG

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Varta AG are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Varta AG reported solid returns over the last few months and may actually be approaching a breakup point.

Encavis AG

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Encavis AG are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Encavis AG is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Varta AG and Encavis AG

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

The idea behind Varta AG and Encavis 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.