Correlation Between STRA Hannoversche and New Hope

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

By analyzing existing cross correlation between STRA Hannoversche Verkehrsbetriebe and New Hope, you can compare the effects of market volatilities on STRA Hannoversche and New Hope 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 STRA Hannoversche with a short position of New Hope. Check out your portfolio center. Please also check ongoing floating volatility patterns of STRA Hannoversche and New Hope.

Diversification Opportunities for STRA Hannoversche and New Hope

-0.45

Correlation Coefficient

STRA Hannoversche  New Hope

Very good diversification

The 3 months correlation between STRA and New is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding STRA Hannoversche Verkehrsbetr and New Hope in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Hope and STRA Hannoversche 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 STRA Hannoversche Verkehrsbetriebe are associated (or correlated) with New Hope. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Hope has no effect on the direction of STRA Hannoversche i.e., STRA Hannoversche and New Hope go up and down completely randomly.

Pair Corralation between STRA Hannoversche and New Hope

Assuming the 90 days horizon STRA Hannoversche Verkehrsbetriebe is expected to under-perform the New Hope. In addition to that, STRA Hannoversche is 1.31 times more volatile than New Hope. It trades about -0.07 of its total potential returns per unit of risk. New Hope is currently generating about 0.11 per unit of volatility. If you would invest  258.00  in New Hope on September 19, 2024 and sell it today you would earn a total of  43.00  from holding New Hope or generate 16.67% return on investment over 90 days.

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

STRA Hannoversche Verkehrsbetr  vs.  New Hope

STRA Hannoversche

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days STRA Hannoversche Verkehrsbetriebe has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

New Hope

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in New Hope are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, New Hope reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with STRA Hannoversche and New Hope

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

The idea behind STRA Hannoversche Verkehrsbetriebe and New Hope 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.