Correlation Between Prevas AB and Precio Fishbone

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

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

Diversification Opportunities for Prevas AB and Precio Fishbone

0.69

Correlation Coefficient

Prevas AB  Precio Fishbone

Poor diversification

The 3 months correlation between Prevas and Precio is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Prevas AB and Precio Fishbone AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Precio Fishbone 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 Precio Fishbone. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Precio Fishbone AB has no effect on the direction of Prevas AB i.e., Prevas AB and Precio Fishbone go up and down completely randomly.

Pair Corralation between Prevas AB and Precio Fishbone

Assuming the 90 days trading horizon Prevas AB is expected to generate 1.16 times more return on investment than Precio Fishbone. However, Prevas AB is 1.16 times more volatile than Precio Fishbone AB. It trades about -0.04 of its potential returns per unit of risk. Precio Fishbone AB is currently generating about -0.13 per unit of risk. If you would invest  12,660  in Prevas AB on October 7, 2024 and sell it today you would lose (940.00) from holding Prevas AB or give up 7.42% of portfolio value over 90 days.

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

Prevas AB  vs.  Precio Fishbone 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 somewhat strong technical and fundamental indicators, Prevas AB is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Precio Fishbone AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Precio Fishbone AB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's fundamental indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Prevas AB and Precio Fishbone

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

The idea behind Prevas AB and Precio Fishbone 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.