Correlation Between Addtech AB and Vestas Wind

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

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

Diversification Opportunities for Addtech AB and Vestas Wind

0.09

Correlation Coefficient

Addtech AB  Vestas Wind

Significant diversification

The 3 months correlation between Addtech and Vestas is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Addtech AB and Vestas Wind Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vestas Wind Systems 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 Vestas Wind. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vestas Wind Systems has no effect on the direction of Addtech AB i.e., Addtech AB and Vestas Wind go up and down completely randomly.

Pair Corralation between Addtech AB and Vestas Wind

Assuming the 90 days trading horizon Addtech AB is expected to generate 0.61 times more return on investment than Vestas Wind. However, Addtech AB is 1.65 times less risky than Vestas Wind. It trades about 0.09 of its potential returns per unit of risk. Vestas Wind Systems is currently generating about 0.05 per unit of risk. If you would invest  2,624  in Addtech AB on December 25, 2024 and sell it today you would earn a total of  240.00  from holding Addtech AB or generate 9.15% 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.  Vestas Wind Systems

Addtech AB

Risk-Adjusted Performance

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 unsteady basic indicators, Addtech AB may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Vestas Wind Systems

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Vestas Wind Systems are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile fundamental drivers, Vestas Wind may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Addtech AB and Vestas Wind

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

The idea behind Addtech AB and Vestas Wind Systems 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.