Correlation Between Paxman AB and Dignitana

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

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

Diversification Opportunities for Paxman AB and Dignitana

0.3

Correlation Coefficient

Paxman AB  Dignitana

Weak diversification

The 3 months correlation between Paxman and Dignitana is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Paxman AB and Dignitana AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dignitana AB and Paxman 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 Paxman AB are associated (or correlated) with Dignitana. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dignitana AB has no effect on the direction of Paxman AB i.e., Paxman AB and Dignitana go up and down completely randomly.

Pair Corralation between Paxman AB and Dignitana

Assuming the 90 days trading horizon Paxman AB is expected to under-perform the Dignitana. But the stock apears to be less risky and, when comparing its historical volatility, Paxman AB is 1.34 times less risky than Dignitana. The stock trades about -0.12 of its potential returns per unit of risk. The Dignitana AB is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  110.00  in Dignitana AB on September 14, 2024 and sell it today you would lose (10.00) from holding Dignitana AB or give up 9.09% of portfolio value over 90 days.

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

Paxman AB  vs.  Dignitana AB

Paxman AB

Risk-Adjusted Performance

4 of 100

Insignificant

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

Dignitana AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dignitana AB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Dignitana is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Paxman AB and Dignitana

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

The idea behind Paxman AB and Dignitana 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.