Correlation Between Divio Technologies and Modelon AB

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

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

Diversification Opportunities for Divio Technologies and Modelon AB

-0.1

Correlation Coefficient

Divio Technologies  Modelon AB

Good diversification

The 3 months correlation between Divio and Modelon is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Divio Technologies AB and Modelon AB Cl in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Modelon AB Cl and Divio Technologies 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 Divio Technologies AB are associated (or correlated) with Modelon AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Modelon AB Cl has no effect on the direction of Divio Technologies i.e., Divio Technologies and Modelon AB go up and down completely randomly.

Pair Corralation between Divio Technologies and Modelon AB

Assuming the 90 days trading horizon Divio Technologies AB is expected to generate 3.82 times more return on investment than Modelon AB. However, Divio Technologies is 3.82 times more volatile than Modelon AB Cl. It trades about 0.03 of its potential returns per unit of risk. Modelon AB Cl is currently generating about 0.03 per unit of risk. If you would invest  17.00  in Divio Technologies AB on September 4, 2024 and sell it today you would lose (4.00) from holding Divio Technologies AB or give up 23.53% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.19%
Values	Daily Returns

Divio Technologies AB  vs.  Modelon AB Cl

Divio Technologies

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Divio Technologies AB are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak forward indicators, Divio Technologies sustained solid returns over the last few months and may actually be approaching a breakup point.

Modelon AB Cl

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Modelon AB Cl has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong technical and fundamental indicators, Modelon AB is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Divio Technologies and Modelon AB

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

The idea behind Divio Technologies AB and Modelon AB Cl 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.