Correlation Between Meier Tobler and CPH Chemie

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

By analyzing existing cross correlation between Meier Tobler Group and CPH Chemie und, you can compare the effects of market volatilities on Meier Tobler and CPH Chemie 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 Meier Tobler with a short position of CPH Chemie. Check out your portfolio center. Please also check ongoing floating volatility patterns of Meier Tobler and CPH Chemie.

Diversification Opportunities for Meier Tobler and CPH Chemie

0.64

Correlation Coefficient

Meier Tobler  CPH Chemie

Poor diversification

The 3 months correlation between Meier and CPH is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Meier Tobler Group and CPH Chemie und in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CPH Chemie und and Meier Tobler 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 Meier Tobler Group are associated (or correlated) with CPH Chemie. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CPH Chemie und has no effect on the direction of Meier Tobler i.e., Meier Tobler and CPH Chemie go up and down completely randomly.

Pair Corralation between Meier Tobler and CPH Chemie

Assuming the 90 days trading horizon Meier Tobler Group is expected to generate 1.15 times more return on investment than CPH Chemie. However, Meier Tobler is 1.15 times more volatile than CPH Chemie und. It trades about 0.16 of its potential returns per unit of risk. CPH Chemie und is currently generating about 0.08 per unit of risk. If you would invest  2,405  in Meier Tobler Group on September 16, 2024 and sell it today you would earn a total of  495.00  from holding Meier Tobler Group or generate 20.58% return on investment over 90 days.

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

Meier Tobler Group  vs.  CPH Chemie und

Meier Tobler Group

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Meier Tobler Group are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal technical and fundamental indicators, Meier Tobler showed solid returns over the last few months and may actually be approaching a breakup point.

CPH Chemie und

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in CPH Chemie und are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, CPH Chemie may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Meier Tobler and CPH Chemie

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

The idea behind Meier Tobler Group and CPH Chemie und 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.