Correlation Between Cloetta AB and Drillcon

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

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

Diversification Opportunities for Cloetta AB and Drillcon

0.79

Correlation Coefficient

Cloetta AB  Drillcon

Poor diversification

The 3 months correlation between Cloetta and Drillcon is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Cloetta AB and Drillcon AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Drillcon 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 Drillcon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Drillcon AB has no effect on the direction of Cloetta AB i.e., Cloetta AB and Drillcon go up and down completely randomly.

Pair Corralation between Cloetta AB and Drillcon

Assuming the 90 days trading horizon Cloetta AB is expected to generate 1.58 times less return on investment than Drillcon. But when comparing it to its historical volatility, Cloetta AB is 1.24 times less risky than Drillcon. It trades about 0.12 of its potential returns per unit of risk. Drillcon AB is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  445.00  in Drillcon AB on December 29, 2024 and sell it today you would earn a total of  101.00  from holding Drillcon AB or generate 22.7% return on investment over 90 days.

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

Cloetta AB  vs.  Drillcon AB

Cloetta AB

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cloetta AB are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Cloetta AB unveiled solid returns over the last few months and may actually be approaching a breakup point.

Drillcon AB

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Drillcon AB are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Drillcon unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cloetta AB and Drillcon

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

The idea behind Cloetta AB and Drillcon 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.