Correlation Between Disco Corp and AIXTRON SE

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

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

Diversification Opportunities for Disco Corp and AIXTRON SE

-0.44

Correlation Coefficient

Disco Corp  AIXTRON SE

Very good diversification

The 3 months correlation between Disco and AIXTRON is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Disco Corp ADR and AIXTRON SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AIXTRON SE and Disco Corp 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 Disco Corp ADR are associated (or correlated) with AIXTRON SE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AIXTRON SE has no effect on the direction of Disco Corp i.e., Disco Corp and AIXTRON SE go up and down completely randomly.

Pair Corralation between Disco Corp and AIXTRON SE

Assuming the 90 days horizon Disco Corp ADR is expected to generate 1.26 times more return on investment than AIXTRON SE. However, Disco Corp is 1.26 times more volatile than AIXTRON SE. It trades about 0.07 of its potential returns per unit of risk. AIXTRON SE is currently generating about -0.04 per unit of risk. If you would invest  2,436  in Disco Corp ADR on September 12, 2024 and sell it today you would earn a total of  289.00  from holding Disco Corp ADR or generate 11.86% return on investment over 90 days.

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

Disco Corp ADR  vs.  AIXTRON SE

Disco Corp ADR

Risk-Adjusted Performance

5 of 100

Modest

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

AIXTRON SE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AIXTRON SE has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Disco Corp and AIXTRON SE

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

The idea behind Disco Corp ADR and AIXTRON SE 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.