Correlation Between Micro Systemation and Generic Sweden

Can any of the company-specific risk be diversified away by investing in both Micro Systemation and Generic Sweden 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 Generic Sweden 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 Generic Sweden publ, you can compare the effects of market volatilities on Micro Systemation and Generic Sweden 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 Generic Sweden. Check out your portfolio center. Please also check ongoing floating volatility patterns of Micro Systemation and Generic Sweden.

Diversification Opportunities for Micro Systemation and Generic Sweden

0.25

Correlation Coefficient

Micro Systemation  Generic Sweden

Modest diversification

The 3 months correlation between Micro and Generic is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Micro Systemation AB and Generic Sweden publ in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Generic Sweden publ 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 Generic Sweden. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Generic Sweden publ has no effect on the direction of Micro Systemation i.e., Micro Systemation and Generic Sweden go up and down completely randomly.

Pair Corralation between Micro Systemation and Generic Sweden

Assuming the 90 days trading horizon Micro Systemation AB is expected to generate 0.89 times more return on investment than Generic Sweden. However, Micro Systemation AB is 1.12 times less risky than Generic Sweden. It trades about 0.08 of its potential returns per unit of risk. Generic Sweden publ is currently generating about 0.06 per unit of risk. If you would invest  4,660  in Micro Systemation AB on December 28, 2024 and sell it today you would earn a total of  480.00  from holding Micro Systemation AB or generate 10.3% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.39%
Values	Daily Returns

Micro Systemation AB  vs.  Generic Sweden publ

Micro Systemation

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Micro Systemation AB are ranked lower than 6 (%) 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.

Generic Sweden publ

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Generic Sweden publ are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Generic Sweden may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Micro Systemation and Generic Sweden

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

The idea behind Micro Systemation AB and Generic Sweden publ 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.