Correlation Between Ratos AB and Wallenstam

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

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

Diversification Opportunities for Ratos AB and Wallenstam

0.73

Correlation Coefficient

Ratos AB  Wallenstam

Poor diversification

The 3 months correlation between Ratos and Wallenstam is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Ratos AB and Wallenstam AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wallenstam AB and Ratos 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 Ratos AB are associated (or correlated) with Wallenstam. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wallenstam AB has no effect on the direction of Ratos AB i.e., Ratos AB and Wallenstam go up and down completely randomly.

Pair Corralation between Ratos AB and Wallenstam

Assuming the 90 days trading horizon Ratos AB is expected to generate 0.85 times more return on investment than Wallenstam. However, Ratos AB is 1.18 times less risky than Wallenstam. It trades about -0.01 of its potential returns per unit of risk. Wallenstam AB is currently generating about -0.1 per unit of risk. If you would invest  3,384  in Ratos AB on September 12, 2024 and sell it today you would lose (54.00) from holding Ratos AB or give up 1.6% of portfolio value over 90 days.

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

Ratos AB  vs.  Wallenstam AB

Ratos AB

Risk-Adjusted Performance

0 of 100

Very Weak

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

Wallenstam AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Wallenstam AB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's essential 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 Ratos AB and Wallenstam

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

The idea behind Ratos AB and Wallenstam 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.