Correlation Between Cloetta AB and Diadrom Holding

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

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

Diversification Opportunities for Cloetta AB and Diadrom Holding

-0.55

Correlation Coefficient

Cloetta AB  Diadrom Holding

Excellent diversification

The 3 months correlation between Cloetta and Diadrom is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Cloetta 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 Cloetta 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 Cloetta 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 Cloetta AB i.e., Cloetta AB and Diadrom Holding go up and down completely randomly.

Pair Corralation between Cloetta AB and Diadrom Holding

Assuming the 90 days trading horizon Cloetta AB is expected to generate 0.55 times more return on investment than Diadrom Holding. However, Cloetta AB is 1.83 times less risky than Diadrom Holding. It trades about 0.13 of its potential returns per unit of risk. Diadrom Holding AB is currently generating about -0.1 per unit of risk. If you would invest  2,320  in Cloetta AB on September 4, 2024 and sell it today you would earn a total of  302.00  from holding Cloetta AB or generate 13.02% return on investment over 90 days.

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

Cloetta AB  vs.  Diadrom Holding AB

Cloetta AB

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cloetta AB are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Cloetta AB may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Diadrom Holding AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Diadrom Holding AB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Cloetta AB and Diadrom Holding

The main advantage of trading using opposite Cloetta AB and Diadrom Holding positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cloetta AB 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 Cloetta 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.