Correlation Between Sleep Cycle and Micro Systemation

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

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

Diversification Opportunities for Sleep Cycle and Micro Systemation

-0.47

Correlation Coefficient

Sleep Cycle  Micro Systemation

Very good diversification

The 3 months correlation between Sleep and Micro is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Sleep Cycle AB and Micro Systemation AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Micro Systemation and Sleep Cycle 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 Sleep Cycle AB are associated (or correlated) with Micro Systemation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Micro Systemation has no effect on the direction of Sleep Cycle i.e., Sleep Cycle and Micro Systemation go up and down completely randomly.

Pair Corralation between Sleep Cycle and Micro Systemation

Assuming the 90 days trading horizon Sleep Cycle is expected to generate 6.42 times less return on investment than Micro Systemation. In addition to that, Sleep Cycle is 1.19 times more volatile than Micro Systemation AB. It trades about 0.0 of its total potential returns per unit of risk. Micro Systemation AB is currently generating about 0.03 per unit of volatility. If you would invest  3,940  in Micro Systemation AB on October 4, 2024 and sell it today you would earn a total of  720.00  from holding Micro Systemation AB or generate 18.27% return on investment over 90 days.

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

Sleep Cycle AB  vs.  Micro Systemation AB

Sleep Cycle AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sleep Cycle AB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Micro Systemation

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Micro Systemation AB are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Micro Systemation is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Sleep Cycle and Micro Systemation

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

The idea behind Sleep Cycle AB and Micro Systemation 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.