Correlation Between VONOVIA SE and Vonovia SE

Can any of the company-specific risk be diversified away by investing in both VONOVIA SE and Vonovia SE 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 Vonovia SE 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 Vonovia SE, you can compare the effects of market volatilities on VONOVIA SE and Vonovia SE 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 Vonovia SE. Check out your portfolio center. Please also check ongoing floating volatility patterns of VONOVIA SE and Vonovia SE.

Diversification Opportunities for VONOVIA SE and Vonovia SE

0.31

Correlation Coefficient

VONOVIA SE  Vonovia SE

Weak diversification

The 3 months correlation between VONOVIA and Vonovia is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding VONOVIA SE ADR and Vonovia SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vonovia SE 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 Vonovia SE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vonovia SE has no effect on the direction of VONOVIA SE i.e., VONOVIA SE and Vonovia SE go up and down completely randomly.

Pair Corralation between VONOVIA SE and Vonovia SE

Assuming the 90 days trading horizon VONOVIA SE ADR is expected to generate 1.34 times more return on investment than Vonovia SE. However, VONOVIA SE is 1.34 times more volatile than Vonovia SE. It trades about -0.31 of its potential returns per unit of risk. Vonovia SE is currently generating about -0.57 per unit of risk. If you would invest  1,520  in VONOVIA SE ADR on October 12, 2024 and sell it today you would lose (140.00) from holding VONOVIA SE ADR or give up 9.21% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	94.44%
Values	Daily Returns

VONOVIA SE ADR  vs.  Vonovia SE

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 uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Vonovia SE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vonovia SE has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with VONOVIA SE and Vonovia SE

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

The idea behind VONOVIA SE ADR and Vonovia SE 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.