Correlation Between Garo AB and MIPS AB

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

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

Diversification Opportunities for Garo AB and MIPS AB

0.38

Correlation Coefficient

Garo AB  MIPS AB

Weak diversification

The 3 months correlation between Garo and MIPS is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Garo AB and MIPS AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MIPS AB and Garo 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 Garo AB are associated (or correlated) with MIPS AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MIPS AB has no effect on the direction of Garo AB i.e., Garo AB and MIPS AB go up and down completely randomly.

Pair Corralation between Garo AB and MIPS AB

Assuming the 90 days trading horizon Garo AB is expected to generate 1.13 times more return on investment than MIPS AB. However, Garo AB is 1.13 times more volatile than MIPS AB. It trades about -0.09 of its potential returns per unit of risk. MIPS AB is currently generating about -0.12 per unit of risk. If you would invest  2,310  in Garo AB on December 29, 2024 and sell it today you would lose (318.00) from holding Garo AB or give up 13.77% of portfolio value over 90 days.

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

Garo AB  vs.  MIPS AB

Garo AB

Risk-Adjusted Performance

Very Weak

Over the last 90 days Garo 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 April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

MIPS AB

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Garo AB and MIPS AB

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

The idea behind Garo AB and MIPS 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.