Correlation Between Dignitana and Integrum

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

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

Diversification Opportunities for Dignitana and Integrum

0.4

Correlation Coefficient

Dignitana  Integrum

Very weak diversification

The 3 months correlation between Dignitana and Integrum is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Dignitana AB and Integrum AB Series in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Integrum AB Series 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 Integrum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Integrum AB Series has no effect on the direction of Dignitana i.e., Dignitana and Integrum go up and down completely randomly.

Pair Corralation between Dignitana and Integrum

Assuming the 90 days trading horizon Dignitana AB is expected to generate 2.59 times more return on investment than Integrum. However, Dignitana is 2.59 times more volatile than Integrum AB Series. It trades about 0.13 of its potential returns per unit of risk. Integrum AB Series is currently generating about 0.12 per unit of risk. If you would invest  105.00  in Dignitana AB on October 8, 2024 and sell it today you would earn a total of  12.00  from holding Dignitana AB or generate 11.43% return on investment over 90 days.

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

Dignitana AB  vs.  Integrum AB Series

Dignitana AB

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Dignitana AB are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Dignitana unveiled solid returns over the last few months and may actually be approaching a breakup point.

Integrum AB Series

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Integrum AB Series 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 technical and fundamental indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Dignitana and Integrum

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

The idea behind Dignitana AB and Integrum AB Series 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.