Correlation Between Frequentis and Fuchs Petrolub

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

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

Diversification Opportunities for Frequentis and Fuchs Petrolub

-0.75

Correlation Coefficient

Frequentis  Fuchs Petrolub

Pay attention - limited upside

The 3 months correlation between Frequentis and Fuchs is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Frequentis AG and Fuchs Petrolub SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fuchs Petrolub SE and Frequentis 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 Frequentis AG are associated (or correlated) with Fuchs Petrolub. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fuchs Petrolub SE has no effect on the direction of Frequentis i.e., Frequentis and Fuchs Petrolub go up and down completely randomly.

Pair Corralation between Frequentis and Fuchs Petrolub

Assuming the 90 days trading horizon Frequentis AG is expected to under-perform the Fuchs Petrolub. In addition to that, Frequentis is 1.28 times more volatile than Fuchs Petrolub SE. It trades about -0.04 of its total potential returns per unit of risk. Fuchs Petrolub SE is currently generating about 0.1 per unit of volatility. If you would invest  3,878  in Fuchs Petrolub SE on September 5, 2024 and sell it today you would earn a total of  334.00  from holding Fuchs Petrolub SE or generate 8.61% return on investment over 90 days.

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

Frequentis AG  vs.  Fuchs Petrolub SE

Frequentis AG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Frequentis AG has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Frequentis is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Fuchs Petrolub SE

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fuchs Petrolub SE are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent forward indicators, Fuchs Petrolub may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Frequentis and Fuchs Petrolub

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

The idea behind Frequentis AG and Fuchs Petrolub 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.

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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.