Correlation Between Garo AB and Ratos AB

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

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

Diversification Opportunities for Garo AB and Ratos AB

0.32

Correlation Coefficient

Garo AB  Ratos AB

Weak diversification

The 3 months correlation between Garo and Ratos is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Garo AB and Ratos AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ratos AB and Garo 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 Garo AB are associated (or correlated) with Ratos AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ratos AB has no effect on the direction of Garo AB i.e., Garo AB and Ratos AB go up and down completely randomly.

Pair Corralation between Garo AB and Ratos AB

Assuming the 90 days trading horizon Garo AB is expected to generate 2.55 times more return on investment than Ratos AB. However, Garo AB is 2.55 times more volatile than Ratos AB. It trades about 0.08 of its potential returns per unit of risk. Ratos AB is currently generating about -0.08 per unit of risk. If you would invest  2,045  in Garo AB on September 15, 2024 and sell it today you would earn a total of  325.00  from holding Garo AB or generate 15.89% return on investment over 90 days.

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

Garo AB  vs.  Ratos AB

Garo AB

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Garo AB are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Garo AB unveiled solid returns over the last few months and may actually be approaching a breakup point.

Ratos AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ratos AB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Garo AB and Ratos AB

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

The idea behind Garo AB and Ratos 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.