Correlation Between Sinch AB and Powercell Sweden

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

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

Diversification Opportunities for Sinch AB and Powercell Sweden

-0.12

Correlation Coefficient

Sinch AB  Powercell Sweden

Good diversification

The 3 months correlation between Sinch and Powercell is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Sinch AB and Powercell Sweden in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Powercell Sweden and Sinch 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 Sinch AB are associated (or correlated) with Powercell Sweden. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Powercell Sweden has no effect on the direction of Sinch AB i.e., Sinch AB and Powercell Sweden go up and down completely randomly.

Pair Corralation between Sinch AB and Powercell Sweden

Assuming the 90 days trading horizon Sinch AB is expected to under-perform the Powercell Sweden. But the stock apears to be less risky and, when comparing its historical volatility, Sinch AB is 1.11 times less risky than Powercell Sweden. The stock trades about -0.11 of its potential returns per unit of risk. The Powercell Sweden is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  2,470  in Powercell Sweden on August 31, 2024 and sell it today you would earn a total of  1,212  from holding Powercell Sweden or generate 49.07% return on investment over 90 days.

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

Sinch AB  vs.  Powercell Sweden

Sinch AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sinch AB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak 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.

Powercell Sweden

Risk-Adjusted Performance

11 of 100

Good

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

Pair Trading with Sinch AB and Powercell Sweden

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

The idea behind Sinch AB and Powercell Sweden 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.

Check out your portfolio center.

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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.