Correlation Between Redsense Medical and Serstech

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

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

Diversification Opportunities for Redsense Medical and Serstech

-0.3

Correlation Coefficient

Redsense Medical  Serstech

Very good diversification

The 3 months correlation between Redsense and Serstech is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Redsense Medical AB and Serstech AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Serstech AB and Redsense Medical 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 Redsense Medical AB are associated (or correlated) with Serstech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Serstech AB has no effect on the direction of Redsense Medical i.e., Redsense Medical and Serstech go up and down completely randomly.

Pair Corralation between Redsense Medical and Serstech

Assuming the 90 days trading horizon Redsense Medical is expected to generate 3.54 times less return on investment than Serstech. But when comparing it to its historical volatility, Redsense Medical AB is 1.4 times less risky than Serstech. It trades about 0.11 of its potential returns per unit of risk. Serstech AB is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest  117.00  in Serstech AB on October 8, 2024 and sell it today you would earn a total of  21.00  from holding Serstech AB or generate 17.95% return on investment over 90 days.

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

Redsense Medical AB  vs.  Serstech AB

Redsense Medical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Redsense Medical AB has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Serstech AB

Risk-Adjusted Performance

14 of 100

Good

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

Pair Trading with Redsense Medical and Serstech

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

The idea behind Redsense Medical AB and Serstech 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.