Correlation Between Rejlers AB and Midsona AB

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

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

Diversification Opportunities for Rejlers AB and Midsona AB

0.62

Correlation Coefficient

Rejlers AB  Midsona AB

Poor diversification

The 3 months correlation between Rejlers and Midsona is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Rejlers AB and Midsona AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Midsona AB and Rejlers 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 Rejlers AB are associated (or correlated) with Midsona AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Midsona AB has no effect on the direction of Rejlers AB i.e., Rejlers AB and Midsona AB go up and down completely randomly.

Pair Corralation between Rejlers AB and Midsona AB

Assuming the 90 days trading horizon Rejlers AB is expected to generate 0.55 times more return on investment than Midsona AB. However, Rejlers AB is 1.81 times less risky than Midsona AB. It trades about 0.18 of its potential returns per unit of risk. Midsona AB is currently generating about 0.05 per unit of risk. If you would invest  14,240  in Rejlers AB on December 2, 2024 and sell it today you would earn a total of  2,360  from holding Rejlers AB or generate 16.57% return on investment over 90 days.

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

Rejlers AB  vs.  Midsona AB

Rejlers AB

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Rejlers AB are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain forward-looking indicators, Rejlers AB sustained solid returns over the last few months and may actually be approaching a breakup point.

Midsona AB

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Midsona AB are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Midsona AB may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Rejlers AB and Midsona AB

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

The idea behind Rejlers AB and Midsona 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.