Can any of the company-specific risk be diversified away by investing in both Strong Global and Voxeljet 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 Strong Global and Voxeljet into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Strong Global Entertainment and Voxeljet Ag, you can compare the effects of market volatilities on Strong Global and Voxeljet 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 Strong Global with a short position of Voxeljet. Check out your portfolio center. Please also check ongoing floating volatility patterns of Strong Global and Voxeljet.
Diversification Opportunities for Strong Global and Voxeljet
The 3 months correlation between Strong and Voxeljet is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Strong Global Entertainment and Voxeljet Ag in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Voxeljet Ag and Strong Global 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 Strong Global Entertainment are associated (or correlated) with Voxeljet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Voxeljet Ag has no effect on the direction of Strong Global i.e., Strong Global and Voxeljet go up and down completely randomly.
Pair Corralation between Strong Global and Voxeljet
Considering the 90-day investment horizon Strong Global Entertainment is expected to under-perform the Voxeljet. But the stock apears to be less risky and, when comparing its historical volatility, Strong Global Entertainment is 1.22 times less risky than Voxeljet. The stock trades about -0.08 of its potential returns per unit of risk. The Voxeljet Ag is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest 190.00 in Voxeljet Ag on August 30, 2023 and sell it today you would lose (41.00) from holding Voxeljet Ag or give up 21.58% of portfolio value over 90 days.
Over the last 90 days Strong Global Entertainment has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.
Compared to the overall equity markets, risk-adjusted returns on investments in Voxeljet Ag are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady technical and fundamental indicators, Voxeljet unveiled solid returns over the last few months and may actually be approaching a breakup point.
The main advantage of trading using opposite Strong Global and Voxeljet positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Strong Global position performs unexpectedly, Voxeljet 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 Voxeljet will offset losses from the drop in Voxeljet's long position.
The idea behind Strong Global Entertainment and Voxeljet 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.
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 CEO Directory module to screen CEOs from public companies around the world.
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