Correlation Between Dorma Kaba and Arbonia AG

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

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

Diversification Opportunities for Dorma Kaba and Arbonia AG

0.72

Correlation Coefficient

Dorma Kaba  Arbonia AG

Poor diversification

The 3 months correlation between Dorma and Arbonia is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Dorma Kaba Holding and Arbonia AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arbonia AG and Dorma Kaba 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 Dorma Kaba Holding are associated (or correlated) with Arbonia AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arbonia AG has no effect on the direction of Dorma Kaba i.e., Dorma Kaba and Arbonia AG go up and down completely randomly.

Pair Corralation between Dorma Kaba and Arbonia AG

Assuming the 90 days trading horizon Dorma Kaba Holding is expected to generate 0.69 times more return on investment than Arbonia AG. However, Dorma Kaba Holding is 1.44 times less risky than Arbonia AG. It trades about 0.14 of its potential returns per unit of risk. Arbonia AG is currently generating about 0.08 per unit of risk. If you would invest  47,200  in Dorma Kaba Holding on February 4, 2024 and sell it today you would earn a total of  1,800  from holding Dorma Kaba Holding or generate 3.81% return on investment over 90 days.

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

Dorma Kaba Holding  vs.  Arbonia AG

Dorma Kaba Holding

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Dorma Kaba Holding are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Dorma Kaba may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Arbonia AG

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Arbonia AG are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Arbonia AG showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Dorma Kaba and Arbonia AG

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

The idea behind Dorma Kaba Holding and Arbonia 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.