Correlation Between Profoto Holding and USWE Sports

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

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

Diversification Opportunities for Profoto Holding and USWE Sports

-0.85

Correlation Coefficient

Profoto Holding  USWE Sports

Pay attention - limited upside

The 3 months correlation between Profoto and USWE is -0.85. Overlapping area represents the amount of risk that can be diversified away by holding Profoto Holding AB and USWE Sports AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on USWE Sports AB and Profoto Holding 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 Profoto Holding AB are associated (or correlated) with USWE Sports. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of USWE Sports AB has no effect on the direction of Profoto Holding i.e., Profoto Holding and USWE Sports go up and down completely randomly.

Pair Corralation between Profoto Holding and USWE Sports

Assuming the 90 days trading horizon Profoto Holding AB is expected to under-perform the USWE Sports. In addition to that, Profoto Holding is 1.55 times more volatile than USWE Sports AB. It trades about -0.3 of its total potential returns per unit of risk. USWE Sports AB is currently generating about 0.14 per unit of volatility. If you would invest  865.00  in USWE Sports AB on September 1, 2024 and sell it today you would earn a total of  55.00  from holding USWE Sports AB or generate 6.36% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	95.65%
Values	Daily Returns

Profoto Holding AB  vs.  USWE Sports AB

Profoto Holding AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Profoto Holding AB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in December 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

USWE Sports AB

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in USWE Sports AB are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, USWE Sports unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Profoto Holding and USWE Sports

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

The idea behind Profoto Holding AB and USWE Sports 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.