Correlation Between Isofol Medical and AroCell AB

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

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

Diversification Opportunities for Isofol Medical and AroCell AB

0.37

Correlation Coefficient

Isofol Medical  AroCell AB

Weak diversification

The 3 months correlation between Isofol and AroCell is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Isofol Medical AB and AroCell AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AroCell AB and Isofol Medical 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 Isofol Medical AB are associated (or correlated) with AroCell AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AroCell AB has no effect on the direction of Isofol Medical i.e., Isofol Medical and AroCell AB go up and down completely randomly.

Pair Corralation between Isofol Medical and AroCell AB

Assuming the 90 days trading horizon Isofol Medical AB is expected to under-perform the AroCell AB. But the stock apears to be less risky and, when comparing its historical volatility, Isofol Medical AB is 1.43 times less risky than AroCell AB. The stock trades about -0.23 of its potential returns per unit of risk. The AroCell AB is currently generating about -0.09 of returns per unit of risk over similar time horizon. If you would invest  44.00  in AroCell AB on September 22, 2024 and sell it today you would lose (6.00) from holding AroCell AB or give up 13.64% of portfolio value over 90 days.

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

Isofol Medical AB  vs.  AroCell AB

Isofol Medical AB

Risk-Adjusted Performance

0 of 100

Very Weak

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

AroCell AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AroCell 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 Isofol Medical and AroCell AB

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

The idea behind Isofol Medical AB and AroCell 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.