Correlation Between CAG Group and Prevas AB

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

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

Diversification Opportunities for CAG Group and Prevas AB

-0.71

Correlation Coefficient

CAG Group  Prevas AB

Pay attention - limited upside

The 3 months correlation between CAG and Prevas is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding CAG Group AB and Prevas AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prevas AB and CAG Group 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 CAG Group AB are associated (or correlated) with Prevas AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prevas AB has no effect on the direction of CAG Group i.e., CAG Group and Prevas AB go up and down completely randomly.

Pair Corralation between CAG Group and Prevas AB

Assuming the 90 days trading horizon CAG Group is expected to generate 112.03 times less return on investment than Prevas AB. But when comparing it to its historical volatility, CAG Group AB is 2.32 times less risky than Prevas AB. It trades about 0.0 of its potential returns per unit of risk. Prevas AB is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  10,660  in Prevas AB on September 24, 2024 and sell it today you would earn a total of  740.00  from holding Prevas AB or generate 6.94% return on investment over 90 days.

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

CAG Group AB  vs.  Prevas AB

CAG Group AB

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in CAG Group AB are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, CAG Group is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Prevas AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Prevas AB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with CAG Group and Prevas AB

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

The idea behind CAG Group AB and Prevas 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.