Correlation Between BillerudKorsnas and Proact IT

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

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

Diversification Opportunities for BillerudKorsnas and Proact IT

0.67

Correlation Coefficient

BillerudKorsnas  Proact IT

Poor diversification

The 3 months correlation between BillerudKorsnas and Proact is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding BillerudKorsnas AB and Proact IT Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Proact IT Group and BillerudKorsnas 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 BillerudKorsnas AB are associated (or correlated) with Proact IT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Proact IT Group has no effect on the direction of BillerudKorsnas i.e., BillerudKorsnas and Proact IT go up and down completely randomly.

Pair Corralation between BillerudKorsnas and Proact IT

Assuming the 90 days trading horizon BillerudKorsnas AB is expected to generate 0.43 times more return on investment than Proact IT. However, BillerudKorsnas AB is 2.34 times less risky than Proact IT. It trades about -0.07 of its potential returns per unit of risk. Proact IT Group is currently generating about -0.08 per unit of risk. If you would invest  10,170  in BillerudKorsnas AB on September 24, 2024 and sell it today you would lose (280.00) from holding BillerudKorsnas AB or give up 2.75% of portfolio value over 90 days.

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

BillerudKorsnas AB  vs.  Proact IT Group

BillerudKorsnas AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BillerudKorsnas AB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, BillerudKorsnas is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Proact IT Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Proact IT Group 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 January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with BillerudKorsnas and Proact IT

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

The idea behind BillerudKorsnas AB and Proact IT Group 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.