Correlation Between AAK AB and Midsona AB

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

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

Diversification Opportunities for AAK AB and Midsona AB

-0.5

Correlation Coefficient

AAK AB  Midsona AB

Very good diversification

The 3 months correlation between AAK and Midsona is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding AAK AB and Midsona AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Midsona AB and AAK 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 AAK AB are associated (or correlated) with Midsona AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Midsona AB has no effect on the direction of AAK AB i.e., AAK AB and Midsona AB go up and down completely randomly.

Pair Corralation between AAK AB and Midsona AB

Assuming the 90 days trading horizon AAK AB is expected to under-perform the Midsona AB. But the stock apears to be less risky and, when comparing its historical volatility, AAK AB is 1.38 times less risky than Midsona AB. The stock trades about -0.12 of its potential returns per unit of risk. The Midsona AB is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  1,180  in Midsona AB on December 30, 2024 and sell it today you would earn a total of  70.00  from holding Midsona AB or generate 5.93% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	93.65%
Values	Daily Returns

AAK AB  vs.  Midsona AB

AAK AB

Risk-Adjusted Performance

Very Weak

Over the last 90 days AAK AB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's forward-looking signals remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Midsona AB

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Midsona AB are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Midsona AB may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with AAK AB and Midsona AB

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

The idea behind AAK AB and Midsona 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.