Correlation Between CirChem AB and Resqunit

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

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

Diversification Opportunities for CirChem AB and Resqunit

-0.57

Correlation Coefficient

CirChem AB  Resqunit

Excellent diversification

The 3 months correlation between CirChem and Resqunit is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding CirChem AB and Resqunit AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Resqunit AB 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 Resqunit. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Resqunit AB has no effect on the direction of CirChem AB i.e., CirChem AB and Resqunit go up and down completely randomly.

Pair Corralation between CirChem AB and Resqunit

Assuming the 90 days trading horizon CirChem AB is expected to generate 15.49 times less return on investment than Resqunit. But when comparing it to its historical volatility, CirChem AB is 11.74 times less risky than Resqunit. It trades about 0.08 of its potential returns per unit of risk. Resqunit AB is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  41.00  in Resqunit AB on September 4, 2024 and sell it today you would lose (21.00) from holding Resqunit AB or give up 51.22% of portfolio value over 90 days.

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

CirChem AB  vs.  Resqunit AB

CirChem AB

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CirChem AB are ranked lower than 6 (%) 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.

Resqunit AB

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Resqunit AB are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Resqunit unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CirChem AB and Resqunit

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

The idea behind CirChem AB and Resqunit 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.