Correlation Between Ratos AB and XMReality

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

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

Diversification Opportunities for Ratos AB and XMReality

0.73

Correlation Coefficient

Ratos AB  XMReality

Poor diversification

The 3 months correlation between Ratos and XMReality is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Ratos AB and XMReality AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on XMReality AB and Ratos 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 Ratos AB are associated (or correlated) with XMReality. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of XMReality AB has no effect on the direction of Ratos AB i.e., Ratos AB and XMReality go up and down completely randomly.

Pair Corralation between Ratos AB and XMReality

Assuming the 90 days trading horizon Ratos AB is expected to under-perform the XMReality. But the stock apears to be less risky and, when comparing its historical volatility, Ratos AB is 7.48 times less risky than XMReality. The stock trades about -0.07 of its potential returns per unit of risk. The XMReality AB is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  2.65  in XMReality AB on September 14, 2024 and sell it today you would lose (0.75) from holding XMReality AB or give up 28.3% of portfolio value over 90 days.

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

Ratos AB  vs.  XMReality AB

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.

XMReality AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days XMReality AB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, XMReality is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Ratos AB and XMReality

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

The idea behind Ratos AB and XMReality 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.