Correlation Between ADDvise Group and Sectra AB

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

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

Diversification Opportunities for ADDvise Group and Sectra AB

-0.49

Correlation Coefficient

ADDvise Group  Sectra AB

Very good diversification

The 3 months correlation between ADDvise and Sectra is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding ADDvise Group B and Sectra AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sectra AB and ADDvise Group 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 ADDvise Group B are associated (or correlated) with Sectra AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sectra AB has no effect on the direction of ADDvise Group i.e., ADDvise Group and Sectra AB go up and down completely randomly.

Pair Corralation between ADDvise Group and Sectra AB

Assuming the 90 days trading horizon ADDvise Group B is expected to under-perform the Sectra AB. In addition to that, ADDvise Group is 2.46 times more volatile than Sectra AB. It trades about -0.23 of its total potential returns per unit of risk. Sectra AB is currently generating about 0.2 per unit of volatility. If you would invest  23,800  in Sectra AB on September 4, 2024 and sell it today you would earn a total of  5,245  from holding Sectra AB or generate 22.04% return on investment over 90 days.

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

ADDvise Group B  vs.  Sectra AB

ADDvise Group B

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ADDvise Group B 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 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.

Sectra AB

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sectra AB are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain fundamental indicators, Sectra AB sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ADDvise Group and Sectra AB

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

The idea behind ADDvise Group B and Sectra 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.