Correlation Between WashTec AG and Fresenius

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

By analyzing existing cross correlation between WashTec AG and Fresenius SE Co, you can compare the effects of market volatilities on WashTec AG and Fresenius 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 WashTec AG with a short position of Fresenius. Check out your portfolio center. Please also check ongoing floating volatility patterns of WashTec AG and Fresenius.

Diversification Opportunities for WashTec AG and Fresenius

-0.6

Correlation Coefficient

WashTec AG  Fresenius

Excellent diversification

The 3 months correlation between WashTec and Fresenius is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding WashTec AG and Fresenius SE Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fresenius SE and WashTec 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 WashTec AG are associated (or correlated) with Fresenius. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fresenius SE has no effect on the direction of WashTec AG i.e., WashTec AG and Fresenius go up and down completely randomly.

Pair Corralation between WashTec AG and Fresenius

Assuming the 90 days horizon WashTec AG is expected to generate 1.46 times more return on investment than Fresenius. However, WashTec AG is 1.46 times more volatile than Fresenius SE Co. It trades about 0.13 of its potential returns per unit of risk. Fresenius SE Co is currently generating about 0.04 per unit of risk. If you would invest  349.00  in WashTec AG on September 21, 2024 and sell it today you would earn a total of  143.00  from holding WashTec AG or generate 40.97% return on investment over 90 days.

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

WashTec AG  vs.  Fresenius SE Co

WashTec AG

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in WashTec AG are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental indicators, WashTec AG reported solid returns over the last few months and may actually be approaching a breakup point.

Fresenius SE

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with WashTec AG and Fresenius

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

The idea behind WashTec AG and Fresenius SE 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.