Correlation Between Serstech and Redsense Medical

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

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

Diversification Opportunities for Serstech and Redsense Medical

-0.08

Correlation Coefficient

Serstech  Redsense Medical

Good diversification

The 3 months correlation between Serstech and Redsense is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Serstech AB and Redsense Medical AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Redsense Medical and Serstech 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 Serstech AB are associated (or correlated) with Redsense Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Redsense Medical has no effect on the direction of Serstech i.e., Serstech and Redsense Medical go up and down completely randomly.

Pair Corralation between Serstech and Redsense Medical

Assuming the 90 days trading horizon Serstech AB is expected to generate 1.04 times more return on investment than Redsense Medical. However, Serstech is 1.04 times more volatile than Redsense Medical AB. It trades about 0.07 of its potential returns per unit of risk. Redsense Medical AB is currently generating about 0.0 per unit of risk. If you would invest  39.00  in Serstech AB on October 23, 2024 and sell it today you would earn a total of  78.00  from holding Serstech AB or generate 200.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.78%
Values	Daily Returns

Serstech AB  vs.  Redsense Medical AB

Serstech AB

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Serstech AB are ranked lower than 8 (%) 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.

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.

Pair Trading with Serstech and Redsense Medical

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

The idea behind Serstech AB and Redsense Medical 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.