Correlation Between Paxman AB and Episurf Medical

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

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

Diversification Opportunities for Paxman AB and Episurf Medical

0.2

Correlation Coefficient

Paxman AB  Episurf Medical

Modest diversification

The 3 months correlation between Paxman and Episurf is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Paxman AB and Episurf Medical AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Episurf Medical 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 Episurf Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Episurf Medical AB has no effect on the direction of Paxman AB i.e., Paxman AB and Episurf Medical go up and down completely randomly.

Pair Corralation between Paxman AB and Episurf Medical

Assuming the 90 days trading horizon Paxman AB is expected to under-perform the Episurf Medical. But the stock apears to be less risky and, when comparing its historical volatility, Paxman AB is 2.12 times less risky than Episurf Medical. The stock trades about -0.05 of its potential returns per unit of risk. The Episurf Medical AB is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  14.00  in Episurf Medical AB on December 4, 2024 and sell it today you would lose (2.00) from holding Episurf Medical AB or give up 14.29% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.31%
Values	Daily Returns

Paxman AB  vs.  Episurf Medical AB

Paxman AB

Risk-Adjusted Performance

Very Weak

Over the last 90 days Paxman AB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain 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.

Episurf Medical AB

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Paxman AB and Episurf Medical

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

The idea behind Paxman AB and Episurf Medical 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.