Correlation Between Prevas AB and Hanza AB

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

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

Diversification Opportunities for Prevas AB and Hanza AB

-0.81

Correlation Coefficient

Prevas AB  Hanza AB

Pay attention - limited upside

The 3 months correlation between Prevas and Hanza is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding Prevas AB and Hanza AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hanza AB and Prevas 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 Prevas AB are associated (or correlated) with Hanza AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hanza AB has no effect on the direction of Prevas AB i.e., Prevas AB and Hanza AB go up and down completely randomly.

Pair Corralation between Prevas AB and Hanza AB

Assuming the 90 days trading horizon Prevas AB is expected to generate 1.85 times less return on investment than Hanza AB. But when comparing it to its historical volatility, Prevas AB is 1.28 times less risky than Hanza AB. It trades about 0.16 of its potential returns per unit of risk. Hanza AB is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  6,750  in Hanza AB on September 27, 2024 and sell it today you would earn a total of  770.00  from holding Hanza AB or generate 11.41% return on investment over 90 days.

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

Prevas AB  vs.  Hanza AB

Prevas AB

Risk-Adjusted Performance

0 of 100

Very Weak

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

Hanza AB

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Hanza AB are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Hanza AB unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Prevas AB and Hanza AB

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

The idea behind Prevas AB and Hanza 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..