Correlation Between AlzChem Group and Deutsche Brse

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

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

Diversification Opportunities for AlzChem Group and Deutsche Brse

0.7

Correlation Coefficient

AlzChem Group  Deutsche Brse

Poor diversification

The 3 months correlation between AlzChem and Deutsche is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding AlzChem Group AG and Deutsche Brse AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Deutsche Brse AG and AlzChem Group 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 AlzChem Group AG are associated (or correlated) with Deutsche Brse. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Deutsche Brse AG has no effect on the direction of AlzChem Group i.e., AlzChem Group and Deutsche Brse go up and down completely randomly.

Pair Corralation between AlzChem Group and Deutsche Brse

Assuming the 90 days trading horizon AlzChem Group AG is expected to generate 4.18 times more return on investment than Deutsche Brse. However, AlzChem Group is 4.18 times more volatile than Deutsche Brse AG. It trades about 0.15 of its potential returns per unit of risk. Deutsche Brse AG is currently generating about 0.14 per unit of risk. If you would invest  4,170  in AlzChem Group AG on September 17, 2024 and sell it today you would earn a total of  1,570  from holding AlzChem Group AG or generate 37.65% return on investment over 90 days.

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

AlzChem Group AG  vs.  Deutsche Brse AG

AlzChem Group AG

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in AlzChem Group AG are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, AlzChem Group unveiled solid returns over the last few months and may actually be approaching a breakup point.

Deutsche Brse AG

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Deutsche Brse AG are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Deutsche Brse may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with AlzChem Group and Deutsche Brse

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

The idea behind AlzChem Group AG and Deutsche Brse 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..