Correlation Between Palfinger and Andritz AG

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

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

Diversification Opportunities for Palfinger and Andritz AG

0.91

Correlation Coefficient

Palfinger  Andritz AG

Almost no diversification

The 3 months correlation between Palfinger and Andritz is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Palfinger AG and Andritz AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Andritz AG and Palfinger 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 Palfinger AG are associated (or correlated) with Andritz AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Andritz AG has no effect on the direction of Palfinger i.e., Palfinger and Andritz AG go up and down completely randomly.

Pair Corralation between Palfinger and Andritz AG

Assuming the 90 days trading horizon Palfinger AG is expected to generate 0.69 times more return on investment than Andritz AG. However, Palfinger AG is 1.46 times less risky than Andritz AG. It trades about -0.13 of its potential returns per unit of risk. Andritz AG is currently generating about -0.18 per unit of risk. If you would invest  2,195  in Palfinger AG on September 16, 2024 and sell it today you would lose (221.00) from holding Palfinger AG or give up 10.07% of portfolio value over 90 days.

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

Palfinger AG  vs.  Andritz AG

Palfinger AG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Palfinger AG has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest inconsistent performance, the Stock's essential indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Andritz AG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Andritz AG has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's forward indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Palfinger and Andritz AG

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

The idea behind Palfinger AG and Andritz 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.