Correlation Between Mueller Industries and Thyssenkrupp

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

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

Diversification Opportunities for Mueller Industries and Thyssenkrupp

0.33

Correlation Coefficient

Mueller Industries  Thyssenkrupp

Weak diversification

The 3 months correlation between Mueller and Thyssenkrupp is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Mueller Industries and thyssenkrupp AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on thyssenkrupp AG and Mueller Industries 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 Mueller Industries are associated (or correlated) with Thyssenkrupp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of thyssenkrupp AG has no effect on the direction of Mueller Industries i.e., Mueller Industries and Thyssenkrupp go up and down completely randomly.

Pair Corralation between Mueller Industries and Thyssenkrupp

Assuming the 90 days horizon Mueller Industries is expected to generate 1.43 times more return on investment than Thyssenkrupp. However, Mueller Industries is 1.43 times more volatile than thyssenkrupp AG. It trades about 0.09 of its potential returns per unit of risk. thyssenkrupp AG is currently generating about 0.11 per unit of risk. If you would invest  6,233  in Mueller Industries on September 25, 2024 and sell it today you would earn a total of  1,317  from holding Mueller Industries or generate 21.13% return on investment over 90 days.

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

Mueller Industries  vs.  thyssenkrupp AG

Mueller Industries

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Mueller Industries are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Mueller Industries reported solid returns over the last few months and may actually be approaching a breakup point.

thyssenkrupp AG

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in thyssenkrupp AG are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Thyssenkrupp reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Mueller Industries and Thyssenkrupp

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

The idea behind Mueller Industries and thyssenkrupp 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.