Correlation Between Varta AG and USS

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

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

Diversification Opportunities for Varta AG and USS

-0.7

Correlation Coefficient

Varta AG  USS

Excellent diversification

The 3 months correlation between Varta and USS is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Varta AG and USS Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on USS Co 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 USS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of USS Co has no effect on the direction of Varta AG i.e., Varta AG and USS go up and down completely randomly.

Pair Corralation between Varta AG and USS

Assuming the 90 days trading horizon Varta AG is expected to under-perform the USS. In addition to that, Varta AG is 3.92 times more volatile than USS Co. It trades about -0.41 of its total potential returns per unit of risk. USS Co is currently generating about -0.12 per unit of volatility. If you would invest  855.00  in USS Co on September 23, 2024 and sell it today you would lose (20.00) from holding USS Co or give up 2.34% of portfolio value over 90 days.

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

Varta AG  vs.  USS Co

Varta AG

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Varta AG are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, Varta AG exhibited solid returns over the last few months and may actually be approaching a breakup point.

USS Co

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in USS Co are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, USS 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 USS

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

The idea behind Varta AG and USS Co 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.