Correlation Between Orexo AB and Swedish Orphan

Can any of the company-specific risk be diversified away by investing in both Orexo 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 Orexo 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 Orexo AB and Swedish Orphan Biovitrum, you can compare the effects of market volatilities on Orexo 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 Orexo AB with a short position of Swedish Orphan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Orexo AB and Swedish Orphan.

Diversification Opportunities for Orexo AB and Swedish Orphan

0.83

Correlation Coefficient

Orexo AB  Swedish Orphan

Very poor diversification

The 3 months correlation between Orexo and Swedish is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Orexo 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 Orexo 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 Orexo 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 Orexo AB i.e., Orexo AB and Swedish Orphan go up and down completely randomly.

Pair Corralation between Orexo AB and Swedish Orphan

Assuming the 90 days trading horizon Orexo AB is expected to under-perform the Swedish Orphan. In addition to that, Orexo AB is 1.95 times more volatile than Swedish Orphan Biovitrum. It trades about -0.08 of its total potential returns per unit of risk. Swedish Orphan Biovitrum is currently generating about -0.08 per unit of volatility. If you would invest  31,740  in Swedish Orphan Biovitrum on December 30, 2024 and sell it today you would lose (2,560) from holding Swedish Orphan Biovitrum or give up 8.07% of portfolio value over 90 days.

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

Orexo AB  vs.  Swedish Orphan Biovitrum

Orexo AB

Risk-Adjusted Performance

Very Weak

Over the last 90 days Orexo AB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Swedish Orphan Biovitrum

Risk-Adjusted Performance

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 latest weak performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Orexo AB and Swedish Orphan

The main advantage of trading using opposite Orexo AB and Swedish Orphan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Orexo 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 Orexo 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.

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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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.