Correlation Between Rottneros and SinterCast

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

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

Diversification Opportunities for Rottneros and SinterCast

0.24

Correlation Coefficient

Rottneros  SinterCast

Modest diversification

The 3 months correlation between Rottneros and SinterCast is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Rottneros AB and SinterCast AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SinterCast 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 SinterCast. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SinterCast AB has no effect on the direction of Rottneros i.e., Rottneros and SinterCast go up and down completely randomly.

Pair Corralation between Rottneros and SinterCast

Assuming the 90 days trading horizon Rottneros AB is expected to under-perform the SinterCast. But the stock apears to be less risky and, when comparing its historical volatility, Rottneros AB is 1.0 times less risky than SinterCast. The stock trades about -0.07 of its potential returns per unit of risk. The SinterCast AB is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  10,621  in SinterCast AB on September 4, 2024 and sell it today you would earn a total of  79.00  from holding SinterCast AB or generate 0.74% return on investment over 90 days.

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

Rottneros AB  vs.  SinterCast 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.

SinterCast AB

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in SinterCast AB are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, SinterCast 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 Rottneros and SinterCast

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

The idea behind Rottneros AB and SinterCast 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.