Correlation Between VERBUND AG and Encavis AG

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

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

Diversification Opportunities for VERBUND AG and Encavis AG

0.19

Correlation Coefficient

VERBUND AG  Encavis AG

Average diversification

The 3 months correlation between VERBUND and Encavis is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding VERBUND AG ADR and Encavis AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Encavis AG and VERBUND AG 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 VERBUND AG ADR are associated (or correlated) with Encavis AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Encavis AG has no effect on the direction of VERBUND AG i.e., VERBUND AG and Encavis AG go up and down completely randomly.

Pair Corralation between VERBUND AG and Encavis AG

Assuming the 90 days horizon VERBUND AG ADR is expected to under-perform the Encavis AG. In addition to that, VERBUND AG is 4.19 times more volatile than Encavis AG. It trades about -0.02 of its total potential returns per unit of risk. Encavis AG is currently generating about 0.08 per unit of volatility. If you would invest  1,706  in Encavis AG on September 13, 2024 and sell it today you would earn a total of  30.00  from holding Encavis AG or generate 1.76% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

VERBUND AG ADR  vs.  Encavis AG

VERBUND AG ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days VERBUND AG ADR has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, VERBUND AG is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Encavis AG

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Encavis AG are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Encavis AG is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with VERBUND AG and Encavis AG

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

The idea behind VERBUND AG ADR and Encavis 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 CEOs Directory module to screen CEOs from public companies around the world.