Correlation Between Eolus Vind and Vestum AB

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

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

Diversification Opportunities for Eolus Vind and Vestum AB

-0.41

Correlation Coefficient

Eolus Vind  Vestum AB

Very good diversification

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

Pair Corralation between Eolus Vind and Vestum AB

Assuming the 90 days trading horizon Eolus Vind AB is expected to under-perform the Vestum AB. But the stock apears to be less risky and, when comparing its historical volatility, Eolus Vind AB is 1.08 times less risky than Vestum AB. The stock trades about -0.03 of its potential returns per unit of risk. The Vestum AB is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  950.00  in Vestum AB on September 4, 2024 and sell it today you would earn a total of  166.00  from holding Vestum AB or generate 17.47% return on investment over 90 days.

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

Eolus Vind AB  vs.  Vestum AB

Eolus Vind AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eolus Vind AB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong essential indicators, Eolus Vind is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Vestum AB

Risk-Adjusted Performance

8 of 100

OK

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

Pair Trading with Eolus Vind and Vestum AB

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

The idea behind Eolus Vind AB and Vestum 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.