Correlation Between Peab AB and Redsense Medical

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

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

Diversification Opportunities for Peab AB and Redsense Medical

-0.39

Correlation Coefficient

Peab AB  Redsense Medical

Very good diversification

The 3 months correlation between Peab and Redsense is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Peab AB and Redsense Medical AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Redsense Medical and Peab 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 Peab AB are associated (or correlated) with Redsense Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Redsense Medical has no effect on the direction of Peab AB i.e., Peab AB and Redsense Medical go up and down completely randomly.

Pair Corralation between Peab AB and Redsense Medical

Assuming the 90 days trading horizon Peab AB is expected to under-perform the Redsense Medical. But the stock apears to be less risky and, when comparing its historical volatility, Peab AB is 2.2 times less risky than Redsense Medical. The stock trades about 0.0 of its potential returns per unit of risk. The Redsense Medical AB is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  732.00  in Redsense Medical AB on October 11, 2024 and sell it today you would earn a total of  6.00  from holding Redsense Medical AB or generate 0.82% return on investment over 90 days.

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

Peab AB  vs.  Redsense Medical AB

Peab AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Peab AB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Peab AB is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Redsense Medical

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Redsense Medical AB are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Redsense Medical 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 Peab AB and Redsense Medical

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

The idea behind Peab AB and Redsense 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.

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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.