Correlation Between Spectrumone Publ and Divio Technologies

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

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

Diversification Opportunities for Spectrumone Publ and Divio Technologies

0.47

Correlation Coefficient

Spectrumone Publ  Divio Technologies

Very weak diversification

The 3 months correlation between Spectrumone and Divio is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Spectrumone publ AB and Divio Technologies AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Divio Technologies and Spectrumone Publ 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 Spectrumone publ AB are associated (or correlated) with Divio Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Divio Technologies has no effect on the direction of Spectrumone Publ i.e., Spectrumone Publ and Divio Technologies go up and down completely randomly.

Pair Corralation between Spectrumone Publ and Divio Technologies

Assuming the 90 days trading horizon Spectrumone publ AB is expected to under-perform the Divio Technologies. But the stock apears to be less risky and, when comparing its historical volatility, Spectrumone publ AB is 5.38 times less risky than Divio Technologies. The stock trades about -0.16 of its potential returns per unit of risk. The Divio Technologies AB is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  9.76  in Divio Technologies AB on September 3, 2024 and sell it today you would earn a total of  4.24  from holding Divio Technologies AB or generate 43.44% return on investment over 90 days.

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

Spectrumone publ AB  vs.  Divio Technologies AB

Spectrumone publ

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Spectrumone publ AB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's technical and fundamental indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Divio Technologies

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Divio Technologies AB are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak forward indicators, Divio Technologies sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Spectrumone Publ and Divio Technologies

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

The idea behind Spectrumone publ AB and Divio Technologies 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.