Correlation Between WashTec AG and ModivCare

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

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

Diversification Opportunities for WashTec AG and ModivCare

0.28

Correlation Coefficient

WashTec AG  ModivCare

Modest diversification

The 3 months correlation between WashTec and ModivCare is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding WashTec AG and ModivCare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ModivCare 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 ModivCare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ModivCare has no effect on the direction of WashTec AG i.e., WashTec AG and ModivCare go up and down completely randomly.

Pair Corralation between WashTec AG and ModivCare

Assuming the 90 days horizon WashTec AG is expected to generate 0.49 times more return on investment than ModivCare. However, WashTec AG is 2.05 times less risky than ModivCare. It trades about 0.49 of its potential returns per unit of risk. ModivCare is currently generating about -0.23 per unit of risk. If you would invest  368.00  in WashTec AG on September 21, 2024 and sell it today you would earn a total of  124.00  from holding WashTec AG or generate 33.7% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

WashTec AG  vs.  ModivCare

WashTec AG

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in WashTec AG are ranked lower than 21 (%) 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.

ModivCare

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ModivCare has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable fundamental indicators, ModivCare is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with WashTec AG and ModivCare

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

The idea behind WashTec AG and ModivCare 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.