Correlation Between Dignitana and Paxman AB

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

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

Diversification Opportunities for Dignitana and Paxman AB

0.3

Correlation Coefficient

Dignitana  Paxman AB

Weak diversification

The 3 months correlation between Dignitana and Paxman is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Dignitana AB and Paxman AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Paxman 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 Paxman AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Paxman AB has no effect on the direction of Dignitana i.e., Dignitana and Paxman AB go up and down completely randomly.

Pair Corralation between Dignitana and Paxman AB

Assuming the 90 days trading horizon Dignitana is expected to generate 1.64 times less return on investment than Paxman AB. In addition to that, Dignitana is 2.15 times more volatile than Paxman AB. It trades about 0.02 of its total potential returns per unit of risk. Paxman AB is currently generating about 0.07 per unit of volatility. If you would invest  5,580  in Paxman AB on September 13, 2024 and sell it today you would earn a total of  720.00  from holding Paxman AB or generate 12.9% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.46%
Values	Daily Returns

Dignitana AB  vs.  Paxman AB

Dignitana AB

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Dignitana AB are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Dignitana may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Paxman AB

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Paxman AB are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Paxman AB unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Dignitana and Paxman AB

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

The idea behind Dignitana AB and Paxman 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.