Correlation Between Lenzing Aktiengesellscha and Andritz AG

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

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

Diversification Opportunities for Lenzing Aktiengesellscha and Andritz AG

0.71

Correlation Coefficient

Lenzing Aktiengesellscha  Andritz AG

Poor diversification

The 3 months correlation between Lenzing and Andritz is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Lenzing Aktiengesellschaft and Andritz AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Andritz AG and Lenzing Aktiengesellscha 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 Lenzing Aktiengesellschaft are associated (or correlated) with Andritz AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Andritz AG has no effect on the direction of Lenzing Aktiengesellscha i.e., Lenzing Aktiengesellscha and Andritz AG go up and down completely randomly.

Pair Corralation between Lenzing Aktiengesellscha and Andritz AG

Assuming the 90 days trading horizon Lenzing Aktiengesellschaft is expected to generate 1.79 times more return on investment than Andritz AG. However, Lenzing Aktiengesellscha is 1.79 times more volatile than Andritz AG. It trades about 0.01 of its potential returns per unit of risk. Andritz AG is currently generating about -0.05 per unit of risk. If you would invest  2,960  in Lenzing Aktiengesellschaft on August 23, 2024 and sell it today you would lose (35.00) from holding Lenzing Aktiengesellschaft or give up 1.18% of portfolio value over 90 days.

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

Lenzing Aktiengesellschaft  vs.  Andritz AG

Lenzing Aktiengesellscha

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lenzing Aktiengesellschaft has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Lenzing Aktiengesellscha is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Andritz AG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Andritz AG has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's forward indicators remain fairly strong which may send shares a bit higher in December 2024. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Lenzing Aktiengesellscha and Andritz AG

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

The idea behind Lenzing Aktiengesellschaft and Andritz 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.