Correlation Between INTERSHOP Communications and CeoTronics

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

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

Diversification Opportunities for INTERSHOP Communications and CeoTronics

0.25

Correlation Coefficient

INTERSHOP Communications  CeoTronics

Modest diversification

The 3 months correlation between INTERSHOP and CeoTronics is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding INTERSHOP Communications Aktie and CeoTronics AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CeoTronics AG and INTERSHOP Communications 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 INTERSHOP Communications Aktiengesellschaft are associated (or correlated) with CeoTronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CeoTronics AG has no effect on the direction of INTERSHOP Communications i.e., INTERSHOP Communications and CeoTronics go up and down completely randomly.

Pair Corralation between INTERSHOP Communications and CeoTronics

Assuming the 90 days trading horizon INTERSHOP Communications is expected to generate 4.17 times less return on investment than CeoTronics. But when comparing it to its historical volatility, INTERSHOP Communications Aktiengesellschaft is 1.09 times less risky than CeoTronics. It trades about 0.03 of its potential returns per unit of risk. CeoTronics AG is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  525.00  in CeoTronics AG on September 3, 2024 and sell it today you would earn a total of  115.00  from holding CeoTronics AG or generate 21.9% return on investment over 90 days.

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

INTERSHOP Communications Aktie  vs.  CeoTronics AG

INTERSHOP Communications

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in INTERSHOP Communications Aktiengesellschaft are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, INTERSHOP Communications is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

CeoTronics AG

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CeoTronics AG are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile forward-looking signals, CeoTronics unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with INTERSHOP Communications and CeoTronics

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

The idea behind INTERSHOP Communications Aktiengesellschaft and CeoTronics 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.

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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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.