Correlation Between Varta AG and CAREER EDUCATION

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

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

Diversification Opportunities for Varta AG and CAREER EDUCATION

-0.16

Correlation Coefficient

Varta AG  CAREER EDUCATION

Good diversification

The 3 months correlation between Varta and CAREER is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Varta AG and CAREER EDUCATION in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CAREER EDUCATION 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 CAREER EDUCATION. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CAREER EDUCATION has no effect on the direction of Varta AG i.e., Varta AG and CAREER EDUCATION go up and down completely randomly.

Pair Corralation between Varta AG and CAREER EDUCATION

Assuming the 90 days trading horizon Varta AG is expected to generate 9.25 times more return on investment than CAREER EDUCATION. However, Varta AG is 9.25 times more volatile than CAREER EDUCATION. It trades about 0.03 of its potential returns per unit of risk. CAREER EDUCATION is currently generating about -0.09 per unit of risk. If you would invest  152.00  in Varta AG on December 22, 2024 and sell it today you would lose (31.00) from holding Varta AG or give up 20.39% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	88.33%
Values	Daily Returns

Varta AG  vs.  CAREER EDUCATION

Varta AG

Risk-Adjusted Performance

Weak

Over the last 90 days Varta AG has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather unsteady basic indicators, Varta AG exhibited solid returns over the last few months and may actually be approaching a breakup point.

CAREER EDUCATION

Risk-Adjusted Performance

Very Weak

Over the last 90 days CAREER EDUCATION has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Varta AG and CAREER EDUCATION

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

The idea behind Varta AG and CAREER EDUCATION 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.