Correlation Between AVTECH Sweden and W5 Solutions

Can any of the company-specific risk be diversified away by investing in both AVTECH Sweden and W5 Solutions 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 AVTECH Sweden and W5 Solutions into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between AVTECH Sweden AB and W5 Solutions AB, you can compare the effects of market volatilities on AVTECH Sweden and W5 Solutions 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 AVTECH Sweden with a short position of W5 Solutions. Check out your portfolio center. Please also check ongoing floating volatility patterns of AVTECH Sweden and W5 Solutions.

Diversification Opportunities for AVTECH Sweden and W5 Solutions

0.9

Correlation Coefficient

AVTECH Sweden  W5 Solutions

Almost no diversification

The 3 months correlation between AVTECH and W5 Solutions is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding AVTECH Sweden AB and W5 Solutions AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on W5 Solutions AB and AVTECH Sweden 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 AVTECH Sweden AB are associated (or correlated) with W5 Solutions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of W5 Solutions AB has no effect on the direction of AVTECH Sweden i.e., AVTECH Sweden and W5 Solutions go up and down completely randomly.

Pair Corralation between AVTECH Sweden and W5 Solutions

Assuming the 90 days trading horizon AVTECH Sweden AB is expected to generate 1.22 times more return on investment than W5 Solutions. However, AVTECH Sweden is 1.22 times more volatile than W5 Solutions AB. It trades about -0.17 of its potential returns per unit of risk. W5 Solutions AB is currently generating about -0.32 per unit of risk. If you would invest  538.00  in AVTECH Sweden AB on August 31, 2024 and sell it today you would lose (154.00) from holding AVTECH Sweden AB or give up 28.62% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.46%
Values	Daily Returns

AVTECH Sweden AB  vs.  W5 Solutions AB

AVTECH Sweden AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AVTECH Sweden AB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in December 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

W5 Solutions AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days W5 Solutions AB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in December 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with AVTECH Sweden and W5 Solutions

The main advantage of trading using opposite AVTECH Sweden and W5 Solutions positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AVTECH Sweden position performs unexpectedly, W5 Solutions 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 W5 Solutions will offset losses from the drop in W5 Solutions' long position.

The idea behind AVTECH Sweden AB and W5 Solutions 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..