Correlation Between MIPS AB and Garo AB

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

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

Diversification Opportunities for MIPS AB and Garo AB

0.77

Correlation Coefficient

MIPS AB  Garo AB

Poor diversification

The 3 months correlation between MIPS and Garo is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding MIPS AB and Garo AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Garo AB and MIPS 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 MIPS AB are associated (or correlated) with Garo AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Garo AB has no effect on the direction of MIPS AB i.e., MIPS AB and Garo AB go up and down completely randomly.

Pair Corralation between MIPS AB and Garo AB

Assuming the 90 days trading horizon MIPS AB is expected to under-perform the Garo AB. But the stock apears to be less risky and, when comparing its historical volatility, MIPS AB is 1.06 times less risky than Garo AB. The stock trades about -0.07 of its potential returns per unit of risk. The Garo AB is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  2,405  in Garo AB on August 31, 2024 and sell it today you would lose (275.00) from holding Garo AB or give up 11.43% of portfolio value over 90 days.

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

MIPS AB  vs.  Garo AB

MIPS AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MIPS AB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Garo AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Garo AB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with MIPS AB and Garo AB

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

The idea behind MIPS AB and Garo 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.