Correlation Between Fabege AB and Hitech Development

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

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

Diversification Opportunities for Fabege AB and Hitech Development

0.48

Correlation Coefficient

Fabege AB  Hitech Development

Very weak diversification

The 3 months correlation between Fabege and Hitech is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Fabege AB and Hitech Development Wireless in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hitech Development and Fabege AB 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 Fabege AB are associated (or correlated) with Hitech Development. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hitech Development has no effect on the direction of Fabege AB i.e., Fabege AB and Hitech Development go up and down completely randomly.

Pair Corralation between Fabege AB and Hitech Development

Assuming the 90 days trading horizon Fabege AB is expected to under-perform the Hitech Development. But the stock apears to be less risky and, when comparing its historical volatility, Fabege AB is 16.47 times less risky than Hitech Development. The stock trades about -0.05 of its potential returns per unit of risk. The Hitech Development Wireless is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  0.27  in Hitech Development Wireless on October 20, 2024 and sell it today you would lose (0.13) from holding Hitech Development Wireless or give up 48.15% of portfolio value over 90 days.

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

Fabege AB  vs.  Hitech Development Wireless

Fabege AB

Risk-Adjusted Performance

0 of 100

Very Weak

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

Hitech Development

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Hitech Development Wireless are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Hitech Development unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Fabege AB and Hitech Development

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

The idea behind Fabege AB and Hitech Development Wireless 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.