Correlation Between VERTIV HOLCL and GrafTech International

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

By analyzing existing cross correlation between VERTIV HOLCL A and GrafTech International, you can compare the effects of market volatilities on VERTIV HOLCL and GrafTech International 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 VERTIV HOLCL with a short position of GrafTech International. Check out your portfolio center. Please also check ongoing floating volatility patterns of VERTIV HOLCL and GrafTech International.

Diversification Opportunities for VERTIV HOLCL and GrafTech International

0.85

Correlation Coefficient

VERTIV HOLCL  GrafTech International

Very poor diversification

The 3 months correlation between VERTIV and GrafTech is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding VERTIV HOLCL A and GrafTech International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GrafTech International and VERTIV HOLCL 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 VERTIV HOLCL A are associated (or correlated) with GrafTech International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GrafTech International has no effect on the direction of VERTIV HOLCL i.e., VERTIV HOLCL and GrafTech International go up and down completely randomly.

Pair Corralation between VERTIV HOLCL and GrafTech International

Assuming the 90 days horizon VERTIV HOLCL A is expected to generate 0.58 times more return on investment than GrafTech International. However, VERTIV HOLCL A is 1.72 times less risky than GrafTech International. It trades about -0.21 of its potential returns per unit of risk. GrafTech International is currently generating about -0.16 per unit of risk. If you would invest  13,596  in VERTIV HOLCL A on September 23, 2024 and sell it today you would lose (1,986) from holding VERTIV HOLCL A or give up 14.61% of portfolio value over 90 days.

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

VERTIV HOLCL A  vs.  GrafTech International

VERTIV HOLCL A

Risk-Adjusted Performance

10 of 100

OK

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

GrafTech International

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in GrafTech International are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, GrafTech International reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with VERTIV HOLCL and GrafTech International

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

The idea behind VERTIV HOLCL A and GrafTech International 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..