Correlation Between Creades AB and Episurf Medical

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

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

Diversification Opportunities for Creades AB and Episurf Medical

-0.52

Correlation Coefficient

Creades AB  Episurf Medical

Excellent diversification

The 3 months correlation between Creades and Episurf is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Creades AB and Episurf Medical AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Episurf Medical AB and Creades 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 Creades AB are associated (or correlated) with Episurf Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Episurf Medical AB has no effect on the direction of Creades AB i.e., Creades AB and Episurf Medical go up and down completely randomly.

Pair Corralation between Creades AB and Episurf Medical

Assuming the 90 days trading horizon Creades AB is expected to generate 0.29 times more return on investment than Episurf Medical. However, Creades AB is 3.42 times less risky than Episurf Medical. It trades about 0.17 of its potential returns per unit of risk. Episurf Medical AB is currently generating about -0.07 per unit of risk. If you would invest  7,009  in Creades AB on November 29, 2024 and sell it today you would earn a total of  1,091  from holding Creades AB or generate 15.57% return on investment over 90 days.

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

Creades AB  vs.  Episurf Medical AB

Creades AB

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Creades AB are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical and fundamental indicators, Creades AB sustained solid returns over the last few months and may actually be approaching a breakup point.

Episurf Medical AB

Risk-Adjusted Performance

Very Weak

Over the last 90 days Episurf Medical AB 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 forward indicators remain somewhat strong which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Creades AB and Episurf Medical

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

The idea behind Creades AB and Episurf Medical 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.