Correlation Between ODP Corp and Ceconomy

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

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

Diversification Opportunities for ODP Corp and Ceconomy

0.15

Correlation Coefficient

ODP Corp  Ceconomy

Average diversification

The 3 months correlation between ODP and Ceconomy is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding ODP Corp and Ceconomy AG ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ceconomy AG ADR and ODP Corp 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 ODP Corp are associated (or correlated) with Ceconomy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ceconomy AG ADR has no effect on the direction of ODP Corp i.e., ODP Corp and Ceconomy go up and down completely randomly.

Pair Corralation between ODP Corp and Ceconomy

Considering the 90-day investment horizon ODP Corp is expected to generate 1.58 times less return on investment than Ceconomy. But when comparing it to its historical volatility, ODP Corp is 2.79 times less risky than Ceconomy. It trades about 0.04 of its potential returns per unit of risk. Ceconomy AG ADR is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  52.00  in Ceconomy AG ADR on February 9, 2024 and sell it today you would lose (13.00) from holding Ceconomy AG ADR or give up 25.0% of portfolio value over 90 days.

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

ODP Corp  vs.  Ceconomy AG ADR

ODP Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ODP Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable fundamental indicators, ODP Corp is not utilizing all of its potentials. The newest stock price agitation, may contribute to short-term losses for the retail investors.

Ceconomy AG ADR

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ceconomy AG ADR are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly conflicting basic indicators, Ceconomy may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with ODP Corp and Ceconomy

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

The idea behind ODP Corp and Ceconomy AG ADR 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.