Correlation Between Kapsch Traffic and Palfinger

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

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

Diversification Opportunities for Kapsch Traffic and Palfinger

0.83

Correlation Coefficient

Kapsch Traffic  Palfinger

Very poor diversification

The 3 months correlation between Kapsch and Palfinger is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Kapsch Traffic and Palfinger AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Palfinger AG and Kapsch Traffic 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 Kapsch Traffic are associated (or correlated) with Palfinger. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Palfinger AG has no effect on the direction of Kapsch Traffic i.e., Kapsch Traffic and Palfinger go up and down completely randomly.

Pair Corralation between Kapsch Traffic and Palfinger

Assuming the 90 days trading horizon Kapsch Traffic is expected to under-perform the Palfinger. In addition to that, Kapsch Traffic is 1.6 times more volatile than Palfinger AG. It trades about -0.2 of its total potential returns per unit of risk. Palfinger AG is currently generating about -0.13 per unit of volatility. If you would invest  2,195  in Palfinger AG on September 16, 2024 and sell it today you would lose (221.00) from holding Palfinger AG or give up 10.07% of portfolio value over 90 days.

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

Kapsch Traffic  vs.  Palfinger AG

Kapsch Traffic

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kapsch Traffic has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's forward indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Palfinger AG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Palfinger AG has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest inconsistent performance, the Stock's essential indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Pair Trading with Kapsch Traffic and Palfinger

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

The idea behind Kapsch Traffic and Palfinger 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.