Correlation Between Colas SA and Hannover Rck

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

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

Diversification Opportunities for Colas SA and Hannover Rck

-0.77

Correlation Coefficient

Colas SA  Hannover Rck

Pay attention - limited upside

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

Pair Corralation between Colas SA and Hannover Rck

If you would invest  22,770  in Hannover Rck SE on September 19, 2024 and sell it today you would earn a total of  3,535  from holding Hannover Rck SE or generate 15.52% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	1.54%
Values	Daily Returns

Colas SA  vs.  Hannover Rck SE

Colas SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Colas SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Colas SA is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Hannover Rck SE

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hannover Rck SE are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Hannover Rck reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Colas SA and Hannover Rck

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

The idea behind Colas SA and Hannover Rck SE 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.

Check out your portfolio center.

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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.