Correlation Between Varta AG and 01 Communique

Can any of the company-specific risk be diversified away by investing in both Varta AG and 01 Communique 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 01 Communique into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Varta AG and 01 Communique Laboratory, you can compare the effects of market volatilities on Varta AG and 01 Communique 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 01 Communique. Check out your portfolio center. Please also check ongoing floating volatility patterns of Varta AG and 01 Communique.

Diversification Opportunities for Varta AG and 01 Communique

-0.56

Correlation Coefficient

Varta AG  01 Communique

Excellent diversification

The 3 months correlation between Varta and DFK is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Varta AG and 01 Communique Laboratory in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 01 Communique Laboratory 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 01 Communique. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 01 Communique Laboratory has no effect on the direction of Varta AG i.e., Varta AG and 01 Communique go up and down completely randomly.

Pair Corralation between Varta AG and 01 Communique

Assuming the 90 days trading horizon Varta AG is expected to under-perform the 01 Communique. But the stock apears to be less risky and, when comparing its historical volatility, Varta AG is 5.07 times less risky than 01 Communique. The stock trades about -0.17 of its potential returns per unit of risk. The 01 Communique Laboratory is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  26.00  in 01 Communique Laboratory on October 15, 2024 and sell it today you would earn a total of  3.00  from holding 01 Communique Laboratory or generate 11.54% return on investment over 90 days.

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

Varta AG  vs.  01 Communique Laboratory

Varta AG

Risk-Adjusted Performance

0 of 100

Very 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 fragile performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

01 Communique Laboratory

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in 01 Communique Laboratory are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, 01 Communique reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Varta AG and 01 Communique

The main advantage of trading using opposite Varta AG and 01 Communique positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Varta AG position performs unexpectedly, 01 Communique 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 01 Communique will offset losses from the drop in 01 Communique's long position.

The idea behind Varta AG and 01 Communique Laboratory 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 Anywhere module to track or share privately all of your investments from the convenience of any device.