Correlation Between Hengan International and Henkel AG

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

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

Diversification Opportunities for Hengan International and Henkel AG

0.48

Correlation Coefficient

Hengan International  Henkel AG

Very weak diversification

The 3 months correlation between Hengan and Henkel is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Hengan International Group and Henkel AG Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Henkel AG and Hengan International 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 Hengan International Group are associated (or correlated) with Henkel AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Henkel AG has no effect on the direction of Hengan International i.e., Hengan International and Henkel AG go up and down completely randomly.

Pair Corralation between Hengan International and Henkel AG

Assuming the 90 days horizon Hengan International Group is expected to under-perform the Henkel AG. In addition to that, Hengan International is 1.56 times more volatile than Henkel AG Co. It trades about -0.05 of its total potential returns per unit of risk. Henkel AG Co is currently generating about 0.04 per unit of volatility. If you would invest  1,558  in Henkel AG Co on September 4, 2024 and sell it today you would earn a total of  339.00  from holding Henkel AG Co or generate 21.76% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.8%
Values	Daily Returns

Hengan International Group  vs.  Henkel AG Co

Hengan International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hengan International Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong forward indicators, Hengan International is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Henkel AG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Henkel AG Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's forward-looking signals remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Hengan International and Henkel AG

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

The idea behind Hengan International Group and Henkel AG Co 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.