Correlation Between Henkel AG and Hengan International

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

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

Diversification Opportunities for Henkel AG and Hengan International

0.48

Correlation Coefficient

Henkel AG  Hengan International

Very weak diversification

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

Pair Corralation between Henkel AG and Hengan International

Assuming the 90 days horizon Henkel AG Co is expected to under-perform the Hengan International. But the pink sheet apears to be less risky and, when comparing its historical volatility, Henkel AG Co is 1.9 times less risky than Hengan International. The pink sheet trades about -0.09 of its potential returns per unit of risk. The Hengan International Group is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  1,495  in Hengan International Group on September 5, 2024 and sell it today you would lose (60.00) from holding Hengan International Group or give up 4.01% of portfolio value over 90 days.

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

Henkel AG Co  vs.  Hengan International Group

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 fragile 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.

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.

Pair Trading with Henkel AG and Hengan International

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

The idea behind Henkel AG Co and Hengan International Group 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 CEOs Directory module to screen CEOs from public companies around the world.