Correlation Between DevPort AB and Micro Systemation

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

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

Diversification Opportunities for DevPort AB and Micro Systemation

-0.81

Correlation Coefficient

DevPort AB  Micro Systemation

Pay attention - limited upside

The 3 months correlation between DevPort and Micro is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding DevPort AB and Micro Systemation AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Micro Systemation and DevPort 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 DevPort AB are associated (or correlated) with Micro Systemation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Micro Systemation has no effect on the direction of DevPort AB i.e., DevPort AB and Micro Systemation go up and down completely randomly.

Pair Corralation between DevPort AB and Micro Systemation

Assuming the 90 days trading horizon DevPort AB is expected to under-perform the Micro Systemation. But the stock apears to be less risky and, when comparing its historical volatility, DevPort AB is 1.63 times less risky than Micro Systemation. The stock trades about -0.2 of its potential returns per unit of risk. The Micro Systemation AB is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  4,367  in Micro Systemation AB on August 31, 2024 and sell it today you would earn a total of  733.00  from holding Micro Systemation AB or generate 16.78% return on investment over 90 days.

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

DevPort AB  vs.  Micro Systemation AB

DevPort AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DevPort 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 basic indicators remain somewhat strong which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Micro Systemation

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Micro Systemation AB are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Micro Systemation sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with DevPort AB and Micro Systemation

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

The idea behind DevPort AB and Micro Systemation 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.

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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.