Correlation Between Arista Networks and Thyssenkrupp
Can any of the company-specific risk be diversified away by investing in both Arista Networks and Thyssenkrupp 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 Arista Networks and Thyssenkrupp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Arista Networks and thyssenkrupp AG, you can compare the effects of market volatilities on Arista Networks and Thyssenkrupp 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 Arista Networks with a short position of Thyssenkrupp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Arista Networks and Thyssenkrupp.
Diversification Opportunities for Arista Networks and Thyssenkrupp
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Arista and Thyssenkrupp is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Arista Networks and thyssenkrupp AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on thyssenkrupp AG and Arista Networks 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 Arista Networks are associated (or correlated) with Thyssenkrupp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of thyssenkrupp AG has no effect on the direction of Arista Networks i.e., Arista Networks and Thyssenkrupp go up and down completely randomly.
Pair Corralation between Arista Networks and Thyssenkrupp
Assuming the 90 days horizon Arista Networks is expected to generate 0.8 times more return on investment than Thyssenkrupp. However, Arista Networks is 1.25 times less risky than Thyssenkrupp. It trades about 0.16 of its potential returns per unit of risk. thyssenkrupp AG is currently generating about 0.11 per unit of risk. If you would invest 8,713 in Arista Networks on September 25, 2024 and sell it today you would earn a total of 2,247 from holding Arista Networks or generate 25.79% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 98.46% |
Values | Daily Returns |
Arista Networks vs. thyssenkrupp AG
Performance |
Timeline |
Arista Networks |
thyssenkrupp AG |
Arista Networks and Thyssenkrupp Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Arista Networks and Thyssenkrupp
The main advantage of trading using opposite Arista Networks and Thyssenkrupp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Arista Networks position performs unexpectedly, Thyssenkrupp 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 Thyssenkrupp will offset losses from the drop in Thyssenkrupp's long position.Arista Networks vs. Air Transport Services | Arista Networks vs. Transportadora de Gas | Arista Networks vs. EPSILON HEALTHCARE LTD | Arista Networks vs. GUARDANT HEALTH CL |
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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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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