Correlation Between Compugroup Medical and TIANDE CHEMICAL

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

By analyzing existing cross correlation between Compugroup Medical SE and TIANDE CHEMICAL, you can compare the effects of market volatilities on Compugroup Medical and TIANDE CHEMICAL 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 Compugroup Medical with a short position of TIANDE CHEMICAL. Check out your portfolio center. Please also check ongoing floating volatility patterns of Compugroup Medical and TIANDE CHEMICAL.

Diversification Opportunities for Compugroup Medical and TIANDE CHEMICAL

0.32

Correlation Coefficient

Compugroup Medical  TIANDE CHEMICAL

Weak diversification

The 3 months correlation between Compugroup and TIANDE is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Compugroup Medical SE and TIANDE CHEMICAL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TIANDE CHEMICAL and Compugroup Medical 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 Compugroup Medical SE are associated (or correlated) with TIANDE CHEMICAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TIANDE CHEMICAL has no effect on the direction of Compugroup Medical i.e., Compugroup Medical and TIANDE CHEMICAL go up and down completely randomly.

Pair Corralation between Compugroup Medical and TIANDE CHEMICAL

Assuming the 90 days horizon Compugroup Medical SE is expected to generate 1.03 times more return on investment than TIANDE CHEMICAL. However, Compugroup Medical is 1.03 times more volatile than TIANDE CHEMICAL. It trades about 0.15 of its potential returns per unit of risk. TIANDE CHEMICAL is currently generating about 0.13 per unit of risk. If you would invest  1,443  in Compugroup Medical SE on September 28, 2024 and sell it today you would earn a total of  727.00  from holding Compugroup Medical SE or generate 50.38% return on investment over 90 days.

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

Compugroup Medical SE  vs.  TIANDE CHEMICAL

Compugroup Medical

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Compugroup Medical SE are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Compugroup Medical reported solid returns over the last few months and may actually be approaching a breakup point.

TIANDE CHEMICAL

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in TIANDE CHEMICAL are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, TIANDE CHEMICAL exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Compugroup Medical and TIANDE CHEMICAL

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

The idea behind Compugroup Medical SE and TIANDE CHEMICAL 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.