Correlation Between Traton SE and Active Biotech

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

By analyzing existing cross correlation between Traton SE and Active Biotech AB, you can compare the effects of market volatilities on Traton SE and Active Biotech 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 Traton SE with a short position of Active Biotech. Check out your portfolio center. Please also check ongoing floating volatility patterns of Traton SE and Active Biotech.

Diversification Opportunities for Traton SE and Active Biotech

-0.6

Correlation Coefficient

Traton SE  Active Biotech

Excellent diversification

The 3 months correlation between Traton and Active is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Traton SE and Active Biotech AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Active Biotech AB and Traton SE 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 Traton SE are associated (or correlated) with Active Biotech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Active Biotech AB has no effect on the direction of Traton SE i.e., Traton SE and Active Biotech go up and down completely randomly.

Pair Corralation between Traton SE and Active Biotech

Assuming the 90 days trading horizon Traton SE is expected to generate 3.36 times less return on investment than Active Biotech. But when comparing it to its historical volatility, Traton SE is 14.51 times less risky than Active Biotech. It trades about 0.09 of its potential returns per unit of risk. Active Biotech AB is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  40.00  in Active Biotech AB on September 13, 2024 and sell it today you would lose (28.00) from holding Active Biotech AB or give up 70.0% of portfolio value over 90 days.

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

Traton SE  vs.  Active Biotech AB

Traton SE

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Traton SE are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Traton SE may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Active Biotech AB

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Active Biotech AB are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Active Biotech unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Traton SE and Active Biotech

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

The idea behind Traton SE and Active Biotech AB 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.