Correlation Between ChemoMetec and Broedrene

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

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

Diversification Opportunities for ChemoMetec and Broedrene

0.25

Correlation Coefficient

ChemoMetec  Broedrene

Modest diversification

The 3 months correlation between ChemoMetec and Broedrene is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding ChemoMetec AS and Broedrene AO Johansen in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Broedrene AO Johansen and ChemoMetec 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 ChemoMetec AS are associated (or correlated) with Broedrene. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Broedrene AO Johansen has no effect on the direction of ChemoMetec i.e., ChemoMetec and Broedrene go up and down completely randomly.

Pair Corralation between ChemoMetec and Broedrene

Assuming the 90 days trading horizon ChemoMetec is expected to generate 4.0 times less return on investment than Broedrene. In addition to that, ChemoMetec is 1.65 times more volatile than Broedrene AO Johansen. It trades about 0.01 of its total potential returns per unit of risk. Broedrene AO Johansen is currently generating about 0.09 per unit of volatility. If you would invest  7,910  in Broedrene AO Johansen on December 26, 2024 and sell it today you would earn a total of  730.00  from holding Broedrene AO Johansen or generate 9.23% return on investment over 90 days.

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

ChemoMetec AS  vs.  Broedrene AO Johansen

ChemoMetec AS

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ChemoMetec AS are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, ChemoMetec is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Broedrene AO Johansen

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Broedrene AO Johansen are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak fundamental indicators, Broedrene may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with ChemoMetec and Broedrene

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

The idea behind ChemoMetec AS and Broedrene AO Johansen 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.

Check out your portfolio center.

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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.