Correlation Between Bjorn Borg and Diadrom Holding

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

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

Diversification Opportunities for Bjorn Borg and Diadrom Holding

0.47

Correlation Coefficient

Bjorn Borg  Diadrom Holding

Very weak diversification

The 3 months correlation between Bjorn and Diadrom is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Bjorn Borg AB and Diadrom Holding AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Diadrom Holding AB and Bjorn Borg 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 Bjorn Borg AB are associated (or correlated) with Diadrom Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Diadrom Holding AB has no effect on the direction of Bjorn Borg i.e., Bjorn Borg and Diadrom Holding go up and down completely randomly.

Pair Corralation between Bjorn Borg and Diadrom Holding

Assuming the 90 days trading horizon Bjorn Borg is expected to generate 5.6 times less return on investment than Diadrom Holding. But when comparing it to its historical volatility, Bjorn Borg AB is 1.97 times less risky than Diadrom Holding. It trades about 0.04 of its potential returns per unit of risk. Diadrom Holding AB is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  680.00  in Diadrom Holding AB on December 30, 2024 and sell it today you would earn a total of  128.00  from holding Diadrom Holding AB or generate 18.82% return on investment over 90 days.

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

Bjorn Borg AB  vs.  Diadrom Holding AB

Bjorn Borg AB

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Bjorn Borg AB are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Bjorn Borg is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Diadrom Holding AB

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Diadrom Holding AB are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Diadrom Holding unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bjorn Borg and Diadrom Holding

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

The idea behind Bjorn Borg AB and Diadrom Holding 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.