Correlation Between SpectraCure and Real Heart

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

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

Diversification Opportunities for SpectraCure and Real Heart

0.83

Correlation Coefficient

SpectraCure  Real Heart

Very poor diversification

The 3 months correlation between SpectraCure and Real is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding SpectraCure AB and Real Heart in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Real Heart and SpectraCure 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 SpectraCure AB are associated (or correlated) with Real Heart. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Real Heart has no effect on the direction of SpectraCure i.e., SpectraCure and Real Heart go up and down completely randomly.

Pair Corralation between SpectraCure and Real Heart

Assuming the 90 days trading horizon SpectraCure AB is expected to generate 1.43 times more return on investment than Real Heart. However, SpectraCure is 1.43 times more volatile than Real Heart. It trades about -0.1 of its potential returns per unit of risk. Real Heart is currently generating about -0.2 per unit of risk. If you would invest  229.00  in SpectraCure AB on September 12, 2024 and sell it today you would lose (99.00) from holding SpectraCure AB or give up 43.23% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.46%
Values	Daily Returns

SpectraCure AB  vs.  Real Heart

SpectraCure AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SpectraCure 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 January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Real Heart

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Real Heart 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 January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with SpectraCure and Real Heart

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

The idea behind SpectraCure AB and Real Heart 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.