Correlation Between Midsona AB and Swedish Orphan

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

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

Diversification Opportunities for Midsona AB and Swedish Orphan

0.57

Correlation Coefficient

Midsona AB  Swedish Orphan

Very weak diversification

The 3 months correlation between Midsona and Swedish is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Midsona AB and Swedish Orphan Biovitrum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Swedish Orphan Biovitrum and Midsona AB 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 Midsona AB are associated (or correlated) with Swedish Orphan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Swedish Orphan Biovitrum has no effect on the direction of Midsona AB i.e., Midsona AB and Swedish Orphan go up and down completely randomly.

Pair Corralation between Midsona AB and Swedish Orphan

Assuming the 90 days trading horizon Midsona AB is expected to under-perform the Swedish Orphan. In addition to that, Midsona AB is 1.2 times more volatile than Swedish Orphan Biovitrum. It trades about 0.0 of its total potential returns per unit of risk. Swedish Orphan Biovitrum is currently generating about 0.05 per unit of volatility. If you would invest  20,956  in Swedish Orphan Biovitrum on September 22, 2024 and sell it today you would earn a total of  10,084  from holding Swedish Orphan Biovitrum or generate 48.12% return on investment over 90 days.

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

Midsona AB  vs.  Swedish Orphan Biovitrum

Midsona AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Midsona AB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Swedish Orphan Biovitrum

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Swedish Orphan Biovitrum has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Swedish Orphan 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 Midsona AB and Swedish Orphan

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

The idea behind Midsona AB and Swedish Orphan Biovitrum 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.