Correlation Between Cairo Communication and United Internet

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

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

Diversification Opportunities for Cairo Communication and United Internet

-0.37

Correlation Coefficient

Cairo Communication  United Internet

Very good diversification

The 3 months correlation between Cairo and United is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Cairo Communication SpA and United Internet AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Internet AG and Cairo Communication 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 Cairo Communication SpA are associated (or correlated) with United Internet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Internet AG has no effect on the direction of Cairo Communication i.e., Cairo Communication and United Internet go up and down completely randomly.

Pair Corralation between Cairo Communication and United Internet

Assuming the 90 days trading horizon Cairo Communication SpA is expected to generate 0.62 times more return on investment than United Internet. However, Cairo Communication SpA is 1.61 times less risky than United Internet. It trades about 0.13 of its potential returns per unit of risk. United Internet AG is currently generating about -0.13 per unit of risk. If you would invest  210.00  in Cairo Communication SpA on September 4, 2024 and sell it today you would earn a total of  24.00  from holding Cairo Communication SpA or generate 11.43% return on investment over 90 days.

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

Cairo Communication SpA  vs.  United Internet AG

Cairo Communication SpA

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cairo Communication SpA are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Cairo Communication may actually be approaching a critical reversion point that can send shares even higher in January 2025.

United Internet AG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days United Internet AG has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Cairo Communication and United Internet

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

The idea behind Cairo Communication SpA and United Internet 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.

Check out your portfolio center.

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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.