Correlation Between Gen Digital and WashTec AG

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

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

Diversification Opportunities for Gen Digital and WashTec AG

0.61

Correlation Coefficient

Gen Digital  WashTec AG

Poor diversification

The 3 months correlation between Gen and WashTec is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Gen Digital and WashTec AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WashTec AG and Gen Digital 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 Gen Digital are associated (or correlated) with WashTec AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WashTec AG has no effect on the direction of Gen Digital i.e., Gen Digital and WashTec AG go up and down completely randomly.

Pair Corralation between Gen Digital and WashTec AG

Considering the 90-day investment horizon Gen Digital is expected to under-perform the WashTec AG. But the stock apears to be less risky and, when comparing its historical volatility, Gen Digital is 1.82 times less risky than WashTec AG. The stock trades about -0.28 of its potential returns per unit of risk. The WashTec AG is currently generating about 0.51 of returns per unit of risk over similar time horizon. If you would invest  372.00  in WashTec AG on September 24, 2024 and sell it today you would earn a total of  126.00  from holding WashTec AG or generate 33.87% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.24%
Values	Daily Returns

Gen Digital  vs.  WashTec AG

Gen Digital

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Gen Digital are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical and fundamental indicators, Gen Digital is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

WashTec AG

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in WashTec AG are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak fundamental indicators, WashTec AG reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Gen Digital and WashTec AG

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

The idea behind Gen Digital and WashTec 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.