Correlation Between WD-40 CO and Deutsche Wohnen

Can any of the company-specific risk be diversified away by investing in both WD-40 CO and Deutsche Wohnen 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 WD-40 CO and Deutsche Wohnen into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between WD 40 CO and Deutsche Wohnen SE, you can compare the effects of market volatilities on WD-40 CO and Deutsche Wohnen 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 WD-40 CO with a short position of Deutsche Wohnen. Check out your portfolio center. Please also check ongoing floating volatility patterns of WD-40 CO and Deutsche Wohnen.

Diversification Opportunities for WD-40 CO and Deutsche Wohnen

0.32

Correlation Coefficient

WD-40 CO  Deutsche Wohnen

Weak diversification

The 3 months correlation between WD-40 and Deutsche is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding WD 40 CO and Deutsche Wohnen SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Deutsche Wohnen SE and WD-40 CO 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 WD 40 CO are associated (or correlated) with Deutsche Wohnen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Deutsche Wohnen SE has no effect on the direction of WD-40 CO i.e., WD-40 CO and Deutsche Wohnen go up and down completely randomly.

Pair Corralation between WD-40 CO and Deutsche Wohnen

Assuming the 90 days trading horizon WD 40 CO is expected to under-perform the Deutsche Wohnen. But the stock apears to be less risky and, when comparing its historical volatility, WD 40 CO is 1.07 times less risky than Deutsche Wohnen. The stock trades about -0.66 of its potential returns per unit of risk. The Deutsche Wohnen SE is currently generating about -0.18 of returns per unit of risk over similar time horizon. If you would invest  2,410  in Deutsche Wohnen SE on October 10, 2024 and sell it today you would lose (110.00) from holding Deutsche Wohnen SE or give up 4.56% of portfolio value over 90 days.

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

WD 40 CO  vs.  Deutsche Wohnen SE

WD 40 CO

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days WD 40 CO has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, WD-40 CO is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Deutsche Wohnen SE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Deutsche Wohnen SE has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Deutsche Wohnen is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with WD-40 CO and Deutsche Wohnen

The main advantage of trading using opposite WD-40 CO and Deutsche Wohnen positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WD-40 CO position performs unexpectedly, Deutsche Wohnen 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 Deutsche Wohnen will offset losses from the drop in Deutsche Wohnen's long position.

The idea behind WD 40 CO and Deutsche Wohnen 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.