Correlation Between Hydract AS and Risma Systems

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

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

Diversification Opportunities for Hydract AS and Risma Systems

0.5

Correlation Coefficient

Hydract AS  Risma Systems

Very weak diversification

The 3 months correlation between Hydract and Risma is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Hydract AS and Risma Systems AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Risma Systems AS and Hydract AS 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 Hydract AS are associated (or correlated) with Risma Systems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Risma Systems AS has no effect on the direction of Hydract AS i.e., Hydract AS and Risma Systems go up and down completely randomly.

Pair Corralation between Hydract AS and Risma Systems

Assuming the 90 days trading horizon Hydract AS is expected to generate 3.24 times more return on investment than Risma Systems. However, Hydract AS is 3.24 times more volatile than Risma Systems AS. It trades about 0.09 of its potential returns per unit of risk. Risma Systems AS is currently generating about 0.09 per unit of risk. If you would invest  85.00  in Hydract AS on October 6, 2024 and sell it today you would lose (32.00) from holding Hydract AS or give up 37.65% of portfolio value over 90 days.

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

Hydract AS  vs.  Risma Systems AS

Hydract AS

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hydract AS are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental indicators, Hydract AS sustained solid returns over the last few months and may actually be approaching a breakup point.

Risma Systems AS

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Risma Systems AS are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating fundamental indicators, Risma Systems exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hydract AS and Risma Systems

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

The idea behind Hydract AS and Risma Systems AS 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.