Correlation Between AZZ Incorporated and Thyssenkrupp

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

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

Diversification Opportunities for AZZ Incorporated and Thyssenkrupp

0.74

Correlation Coefficient

AZZ Incorporated  Thyssenkrupp

Poor diversification

The 3 months correlation between AZZ and Thyssenkrupp is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding AZZ Incorporated and Thyssenkrupp AG ON in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thyssenkrupp AG ON and AZZ Incorporated 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 AZZ Incorporated 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 ON has no effect on the direction of AZZ Incorporated i.e., AZZ Incorporated and Thyssenkrupp go up and down completely randomly.

Pair Corralation between AZZ Incorporated and Thyssenkrupp

Considering the 90-day investment horizon AZZ Incorporated is expected to generate 10.94 times less return on investment than Thyssenkrupp. But when comparing it to its historical volatility, AZZ Incorporated is 1.88 times less risky than Thyssenkrupp. It trades about 0.01 of its potential returns per unit of risk. Thyssenkrupp AG ON is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  358.00  in Thyssenkrupp AG ON on September 20, 2024 and sell it today you would earn a total of  51.00  from holding Thyssenkrupp AG ON or generate 14.25% return on investment over 90 days.

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

AZZ Incorporated  vs.  Thyssenkrupp AG ON

AZZ Incorporated

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AZZ Incorporated has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, AZZ Incorporated is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Thyssenkrupp AG ON

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Thyssenkrupp AG ON are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak forward-looking signals, Thyssenkrupp reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with AZZ Incorporated and Thyssenkrupp

The main advantage of trading using opposite AZZ Incorporated and Thyssenkrupp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AZZ Incorporated 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.

The idea behind AZZ Incorporated and Thyssenkrupp AG ON 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.