Correlation Between TUI AG and Arma Services

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

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

Diversification Opportunities for TUI AG and Arma Services

0.0

Correlation Coefficient

TUI AG  Arma Services

Pay attention - limited upside

The 3 months correlation between TUI and Arma is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding TUI AG and Arma Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arma Services and TUI 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 TUI AG are associated (or correlated) with Arma Services. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arma Services has no effect on the direction of TUI AG i.e., TUI AG and Arma Services go up and down completely randomly.

Pair Corralation between TUI AG and Arma Services

Assuming the 90 days horizon TUI AG is expected to generate 13.37 times more return on investment than Arma Services. However, TUI AG is 13.37 times more volatile than Arma Services. It trades about 0.13 of its potential returns per unit of risk. Arma Services is currently generating about -0.06 per unit of risk. If you would invest  176.00  in TUI AG on September 3, 2024 and sell it today you would earn a total of  629.00  from holding TUI AG or generate 357.39% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

TUI AG  vs.  Arma Services

TUI AG

Risk-Adjusted Performance

7 of 100

OK

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

Arma Services

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Arma Services has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable primary indicators, Arma Services is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with TUI AG and Arma Services

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

The idea behind TUI AG and Arma Services 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.