Correlation Between INTERSHOP Communications and TUI AG

Can any of the company-specific risk be diversified away by investing in both INTERSHOP Communications and TUI 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 INTERSHOP Communications and TUI AG 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 TUI AG, you can compare the effects of market volatilities on INTERSHOP Communications and TUI 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 INTERSHOP Communications with a short position of TUI AG. Check out your portfolio center. Please also check ongoing floating volatility patterns of INTERSHOP Communications and TUI AG.

Diversification Opportunities for INTERSHOP Communications and TUI AG

0.73

Correlation Coefficient

INTERSHOP Communications  TUI AG

Poor diversification

The 3 months correlation between INTERSHOP and TUI is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding INTERSHOP Communications Aktie and TUI AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TUI 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 TUI AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TUI AG has no effect on the direction of INTERSHOP Communications i.e., INTERSHOP Communications and TUI AG go up and down completely randomly.

Pair Corralation between INTERSHOP Communications and TUI AG

Assuming the 90 days trading horizon INTERSHOP Communications is expected to generate 4.59 times less return on investment than TUI AG. In addition to that, INTERSHOP Communications is 1.35 times more volatile than TUI AG. It trades about 0.03 of its total potential returns per unit of risk. TUI AG is currently generating about 0.2 per unit of volatility. If you would invest  595.00  in TUI AG on September 3, 2024 and sell it today you would earn a total of  156.00  from holding TUI AG or generate 26.22% return on investment over 90 days.

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

INTERSHOP Communications Aktie  vs.  TUI 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.

TUI AG

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in TUI AG are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, TUI AG exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with INTERSHOP Communications and TUI AG

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

The idea behind INTERSHOP Communications Aktiengesellschaft and TUI 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.