Correlation Between FormPipe Software and Exsitec Holding

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

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

Diversification Opportunities for FormPipe Software and Exsitec Holding

0.73

Correlation Coefficient

FormPipe Software  Exsitec Holding

Poor diversification

The 3 months correlation between FormPipe and Exsitec is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding FormPipe Software AB and Exsitec Holding AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Exsitec Holding AB and FormPipe Software 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 FormPipe Software AB are associated (or correlated) with Exsitec Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Exsitec Holding AB has no effect on the direction of FormPipe Software i.e., FormPipe Software and Exsitec Holding go up and down completely randomly.

Pair Corralation between FormPipe Software and Exsitec Holding

Assuming the 90 days trading horizon FormPipe Software AB is expected to generate 1.19 times more return on investment than Exsitec Holding. However, FormPipe Software is 1.19 times more volatile than Exsitec Holding AB. It trades about -0.01 of its potential returns per unit of risk. Exsitec Holding AB is currently generating about -0.1 per unit of risk. If you would invest  2,495  in FormPipe Software AB on September 24, 2024 and sell it today you would lose (135.00) from holding FormPipe Software AB or give up 5.41% of portfolio value over 90 days.

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

FormPipe Software AB  vs.  Exsitec Holding AB

FormPipe Software

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FormPipe Software AB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Exsitec Holding AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Exsitec Holding AB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with FormPipe Software and Exsitec Holding

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

The idea behind FormPipe Software AB and Exsitec Holding 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.