Correlation Between Cembra Money and Valiant Holding

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

By analyzing existing cross correlation between Cembra Money Bank and Valiant Holding AG, you can compare the effects of market volatilities on Cembra Money and Valiant Holding 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 Cembra Money with a short position of Valiant Holding. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cembra Money and Valiant Holding.

Diversification Opportunities for Cembra Money and Valiant Holding

0.88

Correlation Coefficient

Cembra Money  Valiant Holding

Very poor diversification

The 3 months correlation between Cembra and Valiant is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Cembra Money Bank and Valiant Holding AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Valiant Holding AG and Cembra Money 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 Cembra Money Bank are associated (or correlated) with Valiant Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Valiant Holding AG has no effect on the direction of Cembra Money i.e., Cembra Money and Valiant Holding go up and down completely randomly.

Pair Corralation between Cembra Money and Valiant Holding

Assuming the 90 days trading horizon Cembra Money Bank is expected to generate 1.07 times more return on investment than Valiant Holding. However, Cembra Money is 1.07 times more volatile than Valiant Holding AG. It trades about 0.17 of its potential returns per unit of risk. Valiant Holding AG is currently generating about 0.15 per unit of risk. If you would invest  7,660  in Cembra Money Bank on September 12, 2024 and sell it today you would earn a total of  690.00  from holding Cembra Money Bank or generate 9.01% return on investment over 90 days.

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

Cembra Money Bank  vs.  Valiant Holding AG

Cembra Money Bank

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Cembra Money Bank are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Cembra Money may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Valiant Holding AG

Risk-Adjusted Performance

11 of 100

Good

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

Pair Trading with Cembra Money and Valiant Holding

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

The idea behind Cembra Money Bank and Valiant Holding 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.