Correlation Between Full Truck and WashTec AG

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

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

Diversification Opportunities for Full Truck and WashTec AG

0.81

Correlation Coefficient

Full Truck  WashTec AG

Very poor diversification

The 3 months correlation between Full and WashTec is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Full Truck Alliance and WashTec AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WashTec AG and Full Truck 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 Full Truck Alliance are associated (or correlated) with WashTec AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WashTec AG has no effect on the direction of Full Truck i.e., Full Truck and WashTec AG go up and down completely randomly.

Pair Corralation between Full Truck and WashTec AG

Considering the 90-day investment horizon Full Truck is expected to generate 1.75 times less return on investment than WashTec AG. In addition to that, Full Truck is 1.33 times more volatile than WashTec AG. It trades about 0.22 of its total potential returns per unit of risk. WashTec AG is currently generating about 0.51 per unit of volatility. If you would invest  372.00  in WashTec AG on September 24, 2024 and sell it today you would earn a total of  126.00  from holding WashTec AG or generate 33.87% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.24%
Values	Daily Returns

Full Truck Alliance  vs.  WashTec AG

Full Truck Alliance

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Full Truck Alliance are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile primary indicators, Full Truck displayed solid returns over the last few months and may actually be approaching a breakup point.

WashTec AG

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in WashTec AG are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak fundamental indicators, WashTec AG reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Full Truck and WashTec AG

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

The idea behind Full Truck Alliance and WashTec 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.