Correlation Between Dignitana and C Rad

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

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

Diversification Opportunities for Dignitana and C Rad

-0.41

Correlation Coefficient

Dignitana  C Rad

Very good diversification

The 3 months correlation between Dignitana and CRAD-B is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Dignitana AB and C Rad AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on C Rad AB and Dignitana 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 Dignitana AB are associated (or correlated) with C Rad. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of C Rad AB has no effect on the direction of Dignitana i.e., Dignitana and C Rad go up and down completely randomly.

Pair Corralation between Dignitana and C Rad

Assuming the 90 days trading horizon Dignitana AB is expected to generate 2.5 times more return on investment than C Rad. However, Dignitana is 2.5 times more volatile than C Rad AB. It trades about 0.01 of its potential returns per unit of risk. C Rad AB is currently generating about -0.14 per unit of risk. If you would invest  110.00  in Dignitana AB on September 14, 2024 and sell it today you would lose (10.00) from holding Dignitana AB or give up 9.09% of portfolio value over 90 days.

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

Dignitana AB  vs.  C Rad AB

Dignitana AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dignitana AB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Dignitana is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

C Rad AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days C Rad 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 January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Dignitana and C Rad

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

The idea behind Dignitana AB and C Rad 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.