Correlation Between Elekta AB and RaySearch Laboratories

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

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

Diversification Opportunities for Elekta AB and RaySearch Laboratories

-0.58

Correlation Coefficient

Elekta AB  RaySearch Laboratories

Excellent diversification

The 3 months correlation between Elekta and RaySearch is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Elekta AB and RaySearch Laboratories AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RaySearch Laboratories and Elekta AB 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 Elekta AB are associated (or correlated) with RaySearch Laboratories. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RaySearch Laboratories has no effect on the direction of Elekta AB i.e., Elekta AB and RaySearch Laboratories go up and down completely randomly.

Pair Corralation between Elekta AB and RaySearch Laboratories

Assuming the 90 days trading horizon Elekta AB is expected to under-perform the RaySearch Laboratories. But the stock apears to be less risky and, when comparing its historical volatility, Elekta AB is 1.72 times less risky than RaySearch Laboratories. The stock trades about -0.03 of its potential returns per unit of risk. The RaySearch Laboratories AB is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  15,240  in RaySearch Laboratories AB on September 2, 2024 and sell it today you would earn a total of  5,560  from holding RaySearch Laboratories AB or generate 36.48% return on investment over 90 days.

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

Elekta AB  vs.  RaySearch Laboratories AB

Elekta AB

Risk-Adjusted Performance

0 of 100

Very Weak

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

RaySearch Laboratories

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in RaySearch Laboratories AB are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, RaySearch Laboratories unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Elekta AB and RaySearch Laboratories

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

The idea behind Elekta AB and RaySearch Laboratories 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.

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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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.