Correlation Between WOLFDEN RES and Deutsche Wohnen

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

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

Diversification Opportunities for WOLFDEN RES and Deutsche Wohnen

-0.44

Correlation Coefficient

WOLFDEN RES  Deutsche Wohnen

Very good diversification

The 3 months correlation between WOLFDEN and Deutsche is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding WOLFDEN RES P 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 WOLFDEN RES 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 WOLFDEN RES P 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 WOLFDEN RES i.e., WOLFDEN RES and Deutsche Wohnen go up and down completely randomly.

Pair Corralation between WOLFDEN RES and Deutsche Wohnen

Assuming the 90 days horizon WOLFDEN RES P is expected to generate 16.18 times more return on investment than Deutsche Wohnen. However, WOLFDEN RES is 16.18 times more volatile than Deutsche Wohnen SE. It trades about 0.09 of its potential returns per unit of risk. Deutsche Wohnen SE is currently generating about -0.11 per unit of risk. If you would invest  3.15  in WOLFDEN RES P on September 24, 2024 and sell it today you would lose (0.45) from holding WOLFDEN RES P or give up 14.29% of portfolio value over 90 days.

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

WOLFDEN RES P  vs.  Deutsche Wohnen SE

WOLFDEN RES P

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in WOLFDEN RES P are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, WOLFDEN RES reported solid returns over the last few months and may actually be approaching a breakup point.

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. In spite of rather sound forward indicators, Deutsche Wohnen is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with WOLFDEN RES and Deutsche Wohnen

The main advantage of trading using opposite WOLFDEN RES and Deutsche Wohnen positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WOLFDEN RES 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 WOLFDEN RES P 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.