Correlation Between XAAR PLC and Mühlbauer Holding

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

By analyzing existing cross correlation between XAAR PLC LS 10 and Mhlbauer Holding AG, you can compare the effects of market volatilities on XAAR PLC and Mühlbauer Holding 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 XAAR PLC with a short position of Mühlbauer Holding. Check out your portfolio center. Please also check ongoing floating volatility patterns of XAAR PLC and Mühlbauer Holding.

Diversification Opportunities for XAAR PLC and Mühlbauer Holding

0.76

Correlation Coefficient

XAAR PLC  Mühlbauer Holding

Poor diversification

The 3 months correlation between XAAR and Mühlbauer is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding XAAR PLC LS 10 and Mhlbauer Holding AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mühlbauer Holding and XAAR PLC 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 XAAR PLC LS 10 are associated (or correlated) with Mühlbauer Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mühlbauer Holding has no effect on the direction of XAAR PLC i.e., XAAR PLC and Mühlbauer Holding go up and down completely randomly.

Pair Corralation between XAAR PLC and Mühlbauer Holding

Assuming the 90 days horizon XAAR PLC LS 10 is expected to under-perform the Mühlbauer Holding. In addition to that, XAAR PLC is 2.09 times more volatile than Mhlbauer Holding AG. It trades about -0.12 of its total potential returns per unit of risk. Mhlbauer Holding AG is currently generating about -0.1 per unit of volatility. If you would invest  4,420  in Mhlbauer Holding AG on October 15, 2024 and sell it today you would lose (460.00) from holding Mhlbauer Holding AG or give up 10.41% of portfolio value over 90 days.

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

XAAR PLC LS 10  vs.  Mhlbauer Holding AG

XAAR PLC LS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days XAAR PLC LS 10 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Mühlbauer Holding

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mhlbauer Holding AG has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's fundamental drivers remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with XAAR PLC and Mühlbauer Holding

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

The idea behind XAAR PLC LS 10 and Mhlbauer Holding AG 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.