Correlation Between Mhlbauer Holding and XAAR PLC

Can any of the company-specific risk be diversified away by investing in both Mhlbauer Holding and XAAR PLC 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 XAAR PLC 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 XAAR PLC LS 10, you can compare the effects of market volatilities on Mhlbauer Holding and XAAR PLC 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 XAAR PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mhlbauer Holding and XAAR PLC.

Diversification Opportunities for Mhlbauer Holding and XAAR PLC

0.77

Correlation Coefficient

Mhlbauer Holding  XAAR PLC

Poor diversification

The 3 months correlation between Mhlbauer and XAAR is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Mhlbauer Holding AG and XAAR PLC LS 10 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on XAAR PLC LS 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 XAAR PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of XAAR PLC LS has no effect on the direction of Mhlbauer Holding i.e., Mhlbauer Holding and XAAR PLC go up and down completely randomly.

Pair Corralation between Mhlbauer Holding and XAAR PLC

Assuming the 90 days trading horizon Mhlbauer Holding AG is expected to generate 0.32 times more return on investment than XAAR PLC. However, Mhlbauer Holding AG is 3.15 times less risky than XAAR PLC. It trades about 0.22 of its potential returns per unit of risk. XAAR PLC LS 10 is currently generating about -0.1 per unit of risk. If you would invest  3,660  in Mhlbauer Holding AG on September 23, 2024 and sell it today you would earn a total of  220.00  from holding Mhlbauer Holding AG or generate 6.01% return on investment over 90 days.

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

Mhlbauer Holding AG  vs.  XAAR PLC LS 10

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.

XAAR PLC LS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days XAAR PLC LS 10 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Mhlbauer Holding and XAAR PLC

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

The idea behind Mhlbauer Holding AG and XAAR PLC LS 10 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.