Correlation Between CirChem AB and Gapwaves

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

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

Diversification Opportunities for CirChem AB and Gapwaves

-0.8

Correlation Coefficient

CirChem AB  Gapwaves

Pay attention - limited upside

The 3 months correlation between CirChem and Gapwaves is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding CirChem AB and Gapwaves AB Series in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gapwaves AB Series and CirChem 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 CirChem AB are associated (or correlated) with Gapwaves. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gapwaves AB Series has no effect on the direction of CirChem AB i.e., CirChem AB and Gapwaves go up and down completely randomly.

Pair Corralation between CirChem AB and Gapwaves

Assuming the 90 days trading horizon CirChem AB is expected to generate 0.88 times more return on investment than Gapwaves. However, CirChem AB is 1.13 times less risky than Gapwaves. It trades about 0.16 of its potential returns per unit of risk. Gapwaves AB Series is currently generating about -0.05 per unit of risk. If you would invest  257.00  in CirChem AB on October 15, 2024 and sell it today you would earn a total of  108.00  from holding CirChem AB or generate 42.02% return on investment over 90 days.

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

CirChem AB  vs.  Gapwaves AB Series

CirChem AB

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CirChem AB are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, CirChem AB sustained solid returns over the last few months and may actually be approaching a breakup point.

Gapwaves AB Series

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gapwaves AB Series has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with CirChem AB and Gapwaves

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

The idea behind CirChem AB and Gapwaves AB Series 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.