Correlation Between Traton SE and Prevas AB

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

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

Diversification Opportunities for Traton SE and Prevas AB

-0.47

Correlation Coefficient

Traton SE  Prevas AB

Very good diversification

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

Pair Corralation between Traton SE and Prevas AB

Assuming the 90 days trading horizon Traton SE is expected to generate 0.82 times more return on investment than Prevas AB. However, Traton SE is 1.22 times less risky than Prevas AB. It trades about -0.01 of its potential returns per unit of risk. Prevas AB is currently generating about -0.1 per unit of risk. If you would invest  34,000  in Traton SE on September 2, 2024 and sell it today you would lose (1,000.00) from holding Traton SE or give up 2.94% of portfolio value over 90 days.

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

Traton SE  vs.  Prevas AB

Traton SE

Risk-Adjusted Performance

0 of 100

Very Weak

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

Prevas AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Prevas AB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak 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.

Pair Trading with Traton SE and Prevas AB

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

The idea behind Traton SE and Prevas 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.

Check out your portfolio center.

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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.