Correlation Between VONOVIA SE and Haier Smart

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

By analyzing existing cross correlation between VONOVIA SE ADR and Haier Smart Home, you can compare the effects of market volatilities on VONOVIA SE and Haier Smart 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 VONOVIA SE with a short position of Haier Smart. Check out your portfolio center. Please also check ongoing floating volatility patterns of VONOVIA SE and Haier Smart.

Diversification Opportunities for VONOVIA SE and Haier Smart

0.2

Correlation Coefficient

VONOVIA SE  Haier Smart

Modest diversification

The 3 months correlation between VONOVIA and Haier is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding VONOVIA SE ADR and Haier Smart Home in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Haier Smart Home and VONOVIA SE 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 VONOVIA SE ADR are associated (or correlated) with Haier Smart. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Haier Smart Home has no effect on the direction of VONOVIA SE i.e., VONOVIA SE and Haier Smart go up and down completely randomly.

Pair Corralation between VONOVIA SE and Haier Smart

Assuming the 90 days trading horizon VONOVIA SE is expected to generate 1.96 times less return on investment than Haier Smart. In addition to that, VONOVIA SE is 1.24 times more volatile than Haier Smart Home. It trades about 0.04 of its total potential returns per unit of risk. Haier Smart Home is currently generating about 0.1 per unit of volatility. If you would invest  108.00  in Haier Smart Home on October 11, 2024 and sell it today you would earn a total of  72.00  from holding Haier Smart Home or generate 66.67% return on investment over 90 days.

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

VONOVIA SE ADR  vs.  Haier Smart Home

VONOVIA SE ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days VONOVIA SE ADR has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Haier Smart Home

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Haier Smart Home are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Haier Smart is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with VONOVIA SE and Haier Smart

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

The idea behind VONOVIA SE ADR and Haier Smart Home 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.