Correlation Between Rottneros and Rejlers AB

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

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

Diversification Opportunities for Rottneros and Rejlers AB

0.56

Correlation Coefficient

Rottneros  Rejlers AB

Very weak diversification

The 3 months correlation between Rottneros and Rejlers is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Rottneros AB and Rejlers AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rejlers AB and Rottneros 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 Rottneros AB are associated (or correlated) with Rejlers AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rejlers AB has no effect on the direction of Rottneros i.e., Rottneros and Rejlers AB go up and down completely randomly.

Pair Corralation between Rottneros and Rejlers AB

Assuming the 90 days trading horizon Rottneros AB is expected to under-perform the Rejlers AB. But the stock apears to be less risky and, when comparing its historical volatility, Rottneros AB is 1.18 times less risky than Rejlers AB. The stock trades about -0.09 of its potential returns per unit of risk. The Rejlers AB is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  15,000  in Rejlers AB on September 5, 2024 and sell it today you would lose (480.00) from holding Rejlers AB or give up 3.2% of portfolio value over 90 days.

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

Rottneros AB  vs.  Rejlers AB

Rottneros AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rottneros 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.

Rejlers AB

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Rottneros and Rejlers AB

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

The idea behind Rottneros AB and Rejlers 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.