Correlation Between Micro Systemation and CAG Group

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

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

Diversification Opportunities for Micro Systemation and CAG Group

-0.49

Correlation Coefficient

Micro Systemation  CAG Group

Very good diversification

The 3 months correlation between Micro and CAG is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Micro Systemation AB and CAG Group AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CAG Group AB and Micro Systemation 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 Micro Systemation AB are associated (or correlated) with CAG Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CAG Group AB has no effect on the direction of Micro Systemation i.e., Micro Systemation and CAG Group go up and down completely randomly.

Pair Corralation between Micro Systemation and CAG Group

Assuming the 90 days trading horizon Micro Systemation AB is expected to generate 1.88 times more return on investment than CAG Group. However, Micro Systemation is 1.88 times more volatile than CAG Group AB. It trades about 0.09 of its potential returns per unit of risk. CAG Group AB is currently generating about 0.03 per unit of risk. If you would invest  4,660  in Micro Systemation AB on December 30, 2024 and sell it today you would earn a total of  540.00  from holding Micro Systemation AB or generate 11.59% return on investment over 90 days.

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

Micro Systemation AB  vs.  CAG Group AB

Micro Systemation

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Micro Systemation AB are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Micro Systemation may actually be approaching a critical reversion point that can send shares even higher in April 2025.

CAG Group AB

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in CAG Group AB are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, CAG Group is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Micro Systemation and CAG Group

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

The idea behind Micro Systemation AB and CAG Group 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.