Correlation Between Mhlbauer Holding and SEIKO EPSON

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

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

Diversification Opportunities for Mhlbauer Holding and SEIKO EPSON

0.22

Correlation Coefficient

Mhlbauer Holding  SEIKO EPSON

Modest diversification

The 3 months correlation between Mhlbauer and SEIKO is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Mhlbauer Holding AG and SEIKO EPSON PADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SEIKO EPSON PADR and Mhlbauer Holding 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 Mhlbauer Holding AG are associated (or correlated) with SEIKO EPSON. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SEIKO EPSON PADR has no effect on the direction of Mhlbauer Holding i.e., Mhlbauer Holding and SEIKO EPSON go up and down completely randomly.

Pair Corralation between Mhlbauer Holding and SEIKO EPSON

Assuming the 90 days trading horizon Mhlbauer Holding AG is expected to under-perform the SEIKO EPSON. But the stock apears to be less risky and, when comparing its historical volatility, Mhlbauer Holding AG is 1.1 times less risky than SEIKO EPSON. The stock trades about -0.07 of its potential returns per unit of risk. The SEIKO EPSON PADR is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  798.00  in SEIKO EPSON PADR on September 23, 2024 and sell it today you would earn a total of  42.00  from holding SEIKO EPSON PADR or generate 5.26% return on investment over 90 days.

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

Mhlbauer Holding AG  vs.  SEIKO EPSON PADR

Mhlbauer Holding

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mhlbauer Holding AG has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's fundamental drivers remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

SEIKO EPSON PADR

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in SEIKO EPSON PADR are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, SEIKO EPSON is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Mhlbauer Holding and SEIKO EPSON

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

The idea behind Mhlbauer Holding AG and SEIKO EPSON PADR 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.