Correlation Between Gelsenwasser and TTW Public

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

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

Diversification Opportunities for Gelsenwasser and TTW Public

0.3

Correlation Coefficient

Gelsenwasser  TTW Public

Weak diversification

The 3 months correlation between Gelsenwasser and TTW is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Gelsenwasser AG and TTW Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TTW Public and Gelsenwasser 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 Gelsenwasser AG are associated (or correlated) with TTW Public. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TTW Public has no effect on the direction of Gelsenwasser i.e., Gelsenwasser and TTW Public go up and down completely randomly.

Pair Corralation between Gelsenwasser and TTW Public

Assuming the 90 days horizon Gelsenwasser AG is expected to under-perform the TTW Public. But the stock apears to be less risky and, when comparing its historical volatility, Gelsenwasser AG is 1.26 times less risky than TTW Public. The stock trades about -0.01 of its potential returns per unit of risk. The TTW Public is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  24.00  in TTW Public on September 22, 2024 and sell it today you would earn a total of  0.00  from holding TTW Public or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.65%
Values	Daily Returns

Gelsenwasser AG  vs.  TTW Public

Gelsenwasser AG

Risk-Adjusted Performance

0 of 100

Very Weak

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

TTW Public

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Gelsenwasser and TTW Public

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

The idea behind Gelsenwasser AG and TTW Public 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.