Correlation Between Freemelt Holding and Midsummer

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

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

Diversification Opportunities for Freemelt Holding and Midsummer

-0.17

Correlation Coefficient

Freemelt Holding  Midsummer

Good diversification

The 3 months correlation between Freemelt and Midsummer is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Freemelt Holding AB and Midsummer AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Midsummer AB and Freemelt Holding 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 Freemelt Holding AB are associated (or correlated) with Midsummer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Midsummer AB has no effect on the direction of Freemelt Holding i.e., Freemelt Holding and Midsummer go up and down completely randomly.

Pair Corralation between Freemelt Holding and Midsummer

Assuming the 90 days trading horizon Freemelt Holding AB is expected to under-perform the Midsummer. In addition to that, Freemelt Holding is 1.46 times more volatile than Midsummer AB. It trades about -0.13 of its total potential returns per unit of risk. Midsummer AB is currently generating about 0.14 per unit of volatility. If you would invest  100.00  in Midsummer AB on September 27, 2024 and sell it today you would earn a total of  51.00  from holding Midsummer AB or generate 51.0% return on investment over 90 days.

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

Freemelt Holding AB  vs.  Midsummer AB

Freemelt Holding

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Freemelt 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.

Midsummer AB

Risk-Adjusted Performance

11 of 100

Good

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

Pair Trading with Freemelt Holding and Midsummer

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

The idea behind Freemelt Holding AB and Midsummer 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.

Check out your portfolio center.

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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.