Correlation Between Addtech AB and DENSO P

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

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

Diversification Opportunities for Addtech AB and DENSO P

-0.01

Correlation Coefficient

Addtech AB  DENSO P

Good diversification

The 3 months correlation between Addtech and DENSO is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Addtech AB and DENSO P ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DENSO P ADR 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 DENSO P. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DENSO P ADR has no effect on the direction of Addtech AB i.e., Addtech AB and DENSO P go up and down completely randomly.

Pair Corralation between Addtech AB and DENSO P

Assuming the 90 days trading horizon Addtech AB is expected to generate 1.81 times more return on investment than DENSO P. However, Addtech AB is 1.81 times more volatile than DENSO P ADR. It trades about 0.12 of its potential returns per unit of risk. DENSO P ADR is currently generating about 0.0 per unit of risk. If you would invest  2,624  in Addtech AB on October 25, 2024 and sell it today you would earn a total of  86.00  from holding Addtech AB or generate 3.28% return on investment over 90 days.

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

Addtech AB  vs.  DENSO P ADR

Addtech AB

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Addtech AB are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Addtech AB may actually be approaching a critical reversion point that can send shares even higher in February 2025.

DENSO P ADR

Risk-Adjusted Performance

4 of 100

Insignificant

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

Pair Trading with Addtech AB and DENSO P

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

The idea behind Addtech AB and DENSO P ADR 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.