Correlation Between Mekonomen and Micro Systemation

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

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

Diversification Opportunities for Mekonomen and Micro Systemation

-0.15

Correlation Coefficient

Mekonomen  Micro Systemation

Good diversification

The 3 months correlation between Mekonomen and Micro is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Mekonomen AB and Micro Systemation AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Micro Systemation and Mekonomen 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 Mekonomen AB are associated (or correlated) with Micro Systemation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Micro Systemation has no effect on the direction of Mekonomen i.e., Mekonomen and Micro Systemation go up and down completely randomly.

Pair Corralation between Mekonomen and Micro Systemation

Assuming the 90 days trading horizon Mekonomen AB is expected to under-perform the Micro Systemation. But the stock apears to be less risky and, when comparing its historical volatility, Mekonomen AB is 1.35 times less risky than Micro Systemation. The stock trades about -0.01 of its potential returns per unit of risk. The Micro Systemation AB is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  4,556  in Micro Systemation AB on October 8, 2024 and sell it today you would earn a total of  24.00  from holding Micro Systemation AB or generate 0.53% return on investment over 90 days.

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

Mekonomen AB  vs.  Micro Systemation AB

Mekonomen AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mekonomen AB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Mekonomen is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Micro Systemation

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Micro Systemation AB are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Micro Systemation is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Mekonomen and Micro Systemation

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

The idea behind Mekonomen AB and Micro Systemation 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.