Correlation Between Addtech AB and XMReality

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

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

Diversification Opportunities for Addtech AB and XMReality

0.19

Correlation Coefficient

Addtech AB  XMReality

Average diversification

The 3 months correlation between Addtech and XMReality is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Addtech AB and XMReality AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on XMReality AB and Addtech 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 Addtech AB are associated (or correlated) with XMReality. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of XMReality AB has no effect on the direction of Addtech AB i.e., Addtech AB and XMReality go up and down completely randomly.

Pair Corralation between Addtech AB and XMReality

Assuming the 90 days trading horizon Addtech AB is expected to generate 5.68 times less return on investment than XMReality. But when comparing it to its historical volatility, Addtech AB is 2.77 times less risky than XMReality. It trades about 0.02 of its potential returns per unit of risk. XMReality AB is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  1.50  in XMReality AB on December 25, 2024 and sell it today you would earn a total of  0.05  from holding XMReality AB or generate 3.33% return on investment over 90 days.

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

Addtech AB  vs.  XMReality AB

Addtech AB

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Addtech AB are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental indicators, Addtech AB is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

XMReality AB

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in XMReality AB are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, XMReality may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Addtech AB and XMReality

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

The idea behind Addtech AB and XMReality 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.