Correlation Between Bilia AB and Grnges AB

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

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

Diversification Opportunities for Bilia AB and Grnges AB

0.81

Correlation Coefficient

Bilia AB  Grnges AB

Very poor diversification

The 3 months correlation between Bilia and Grnges is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Bilia AB and Grnges AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grnges AB and Bilia 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 Bilia AB are associated (or correlated) with Grnges AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grnges AB has no effect on the direction of Bilia AB i.e., Bilia AB and Grnges AB go up and down completely randomly.

Pair Corralation between Bilia AB and Grnges AB

Assuming the 90 days trading horizon Bilia AB is expected to generate 1.49 times less return on investment than Grnges AB. But when comparing it to its historical volatility, Bilia AB is 1.22 times less risky than Grnges AB. It trades about 0.05 of its potential returns per unit of risk. Grnges AB is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  12,480  in Grnges AB on September 15, 2024 and sell it today you would earn a total of  830.00  from holding Grnges AB or generate 6.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.48%
Values	Daily Returns

Bilia AB  vs.  Grnges AB

Bilia AB

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Bilia AB are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong essential indicators, Bilia AB is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Grnges AB

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Grnges AB are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Grnges AB may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Bilia AB and Grnges AB

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

The idea behind Bilia AB and Grnges 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.