Correlation Between CHINA STATE and Varta AG

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

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

Diversification Opportunities for CHINA STATE and Varta AG

0.72

Correlation Coefficient

CHINA STATE  Varta AG

Poor diversification

The 3 months correlation between CHINA and Varta is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding CHINA STATE STRU and Varta AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Varta AG and CHINA STATE 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 CHINA STATE STRU are associated (or correlated) with Varta AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Varta AG has no effect on the direction of CHINA STATE i.e., CHINA STATE and Varta AG go up and down completely randomly.

Pair Corralation between CHINA STATE and Varta AG

Assuming the 90 days trading horizon CHINA STATE is expected to generate 8.8 times less return on investment than Varta AG. But when comparing it to its historical volatility, CHINA STATE STRU is 11.49 times less risky than Varta AG. It trades about 0.08 of its potential returns per unit of risk. Varta AG is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  153.00  in Varta AG on September 22, 2024 and sell it today you would earn a total of  9.00  from holding Varta AG or generate 5.88% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.48%
Values	Daily Returns

CHINA STATE STRU  vs.  Varta AG

CHINA STATE STRU

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in CHINA STATE STRU are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, CHINA STATE may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Varta AG

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Varta AG are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, Varta AG exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CHINA STATE and Varta AG

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

The idea behind CHINA STATE STRU and Varta 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.

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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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.