Correlation Between Gapwaves and Sedana Medical

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

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

Diversification Opportunities for Gapwaves and Sedana Medical

-0.04

Correlation Coefficient

Gapwaves  Sedana Medical

Good diversification

The 3 months correlation between Gapwaves and Sedana is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Gapwaves AB Series and Sedana Medical AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sedana Medical AB and Gapwaves 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 Gapwaves AB Series are associated (or correlated) with Sedana Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sedana Medical AB has no effect on the direction of Gapwaves i.e., Gapwaves and Sedana Medical go up and down completely randomly.

Pair Corralation between Gapwaves and Sedana Medical

Assuming the 90 days trading horizon Gapwaves AB Series is expected to under-perform the Sedana Medical. But the stock apears to be less risky and, when comparing its historical volatility, Gapwaves AB Series is 1.68 times less risky than Sedana Medical. The stock trades about -0.03 of its potential returns per unit of risk. The Sedana Medical AB is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  2,202  in Sedana Medical AB on September 26, 2024 and sell it today you would lose (212.00) from holding Sedana Medical AB or give up 9.63% of portfolio value over 90 days.

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

Gapwaves AB Series  vs.  Sedana Medical AB

Gapwaves AB Series

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gapwaves AB Series has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Sedana Medical AB

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Gapwaves and Sedana Medical

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

The idea behind Gapwaves AB Series and Sedana Medical 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.