Correlation Between Midsummer and Crunchfish

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

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

Diversification Opportunities for Midsummer and Crunchfish

-0.22

Correlation Coefficient

Midsummer  Crunchfish

Very good diversification

The 3 months correlation between Midsummer and Crunchfish is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Midsummer AB and Crunchfish AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Crunchfish AB and Midsummer 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 Midsummer AB are associated (or correlated) with Crunchfish. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Crunchfish AB has no effect on the direction of Midsummer i.e., Midsummer and Crunchfish go up and down completely randomly.

Pair Corralation between Midsummer and Crunchfish

Assuming the 90 days trading horizon Midsummer AB is expected to generate 0.76 times more return on investment than Crunchfish. However, Midsummer AB is 1.31 times less risky than Crunchfish. It trades about -0.02 of its potential returns per unit of risk. Crunchfish AB is currently generating about -0.03 per unit of risk. If you would invest  735.00  in Midsummer AB on September 26, 2024 and sell it today you would lose (584.00) from holding Midsummer AB or give up 79.46% of portfolio value over 90 days.

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

Midsummer AB  vs.  Crunchfish AB

Midsummer AB

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Midsummer AB are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Midsummer unveiled solid returns over the last few months and may actually be approaching a breakup point.

Crunchfish AB

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Midsummer and Crunchfish

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

The idea behind Midsummer AB and Crunchfish 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.