Correlation Between Drillcon and Bjorn Borg

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

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

Diversification Opportunities for Drillcon and Bjorn Borg

0.38

Correlation Coefficient

Drillcon  Bjorn Borg

Weak diversification

The 3 months correlation between Drillcon and Bjorn is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Drillcon AB and Bjorn Borg AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bjorn Borg AB and Drillcon 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 Drillcon AB are associated (or correlated) with Bjorn Borg. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bjorn Borg AB has no effect on the direction of Drillcon i.e., Drillcon and Bjorn Borg go up and down completely randomly.

Pair Corralation between Drillcon and Bjorn Borg

Assuming the 90 days trading horizon Drillcon AB is expected to generate 1.5 times more return on investment than Bjorn Borg. However, Drillcon is 1.5 times more volatile than Bjorn Borg AB. It trades about 0.15 of its potential returns per unit of risk. Bjorn Borg AB is currently generating about 0.04 per unit of risk. If you would invest  445.00  in Drillcon AB on December 30, 2024 and sell it today you would earn a total of  101.00  from holding Drillcon AB or generate 22.7% return on investment over 90 days.

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

Drillcon AB  vs.  Bjorn Borg AB

Drillcon AB

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Drillcon AB are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Drillcon unveiled solid returns over the last few months and may actually be approaching a breakup point.

Bjorn Borg AB

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Bjorn Borg AB are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Bjorn Borg is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Drillcon and Bjorn Borg

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

The idea behind Drillcon AB and Bjorn Borg 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.