Correlation Between CeoTronics and Information Services

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

By analyzing existing cross correlation between CeoTronics AG and Information Services International Dentsu, you can compare the effects of market volatilities on CeoTronics and Information Services 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 CeoTronics with a short position of Information Services. Check out your portfolio center. Please also check ongoing floating volatility patterns of CeoTronics and Information Services.

Diversification Opportunities for CeoTronics and Information Services

0.53

Correlation Coefficient

CeoTronics  Information Services

Very weak diversification

The 3 months correlation between CeoTronics and Information is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding CeoTronics AG and Information Services Internati in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Information Services and CeoTronics 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 CeoTronics AG are associated (or correlated) with Information Services. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Information Services has no effect on the direction of CeoTronics i.e., CeoTronics and Information Services go up and down completely randomly.

Pair Corralation between CeoTronics and Information Services

Assuming the 90 days trading horizon CeoTronics AG is expected to generate 1.3 times more return on investment than Information Services. However, CeoTronics is 1.3 times more volatile than Information Services International Dentsu. It trades about 0.13 of its potential returns per unit of risk. Information Services International Dentsu is currently generating about 0.03 per unit of risk. If you would invest  511.00  in CeoTronics AG on September 16, 2024 and sell it today you would earn a total of  129.00  from holding CeoTronics AG or generate 25.24% return on investment over 90 days.

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

CeoTronics AG  vs.  Information Services Internati

CeoTronics AG

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CeoTronics AG are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile forward-looking signals, CeoTronics unveiled solid returns over the last few months and may actually be approaching a breakup point.

Information Services

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Information Services International Dentsu are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Information Services is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with CeoTronics and Information Services

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

The idea behind CeoTronics AG and Information Services International Dentsu 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.