Correlation Between Sprint Bioscience and Diadrom Holding

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

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

Diversification Opportunities for Sprint Bioscience and Diadrom Holding

-0.21

Correlation Coefficient

Sprint Bioscience  Diadrom Holding

Very good diversification

The 3 months correlation between Sprint and Diadrom is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Sprint Bioscience AB and Diadrom Holding AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Diadrom Holding AB and Sprint Bioscience 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 Sprint Bioscience AB are associated (or correlated) with Diadrom Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Diadrom Holding AB has no effect on the direction of Sprint Bioscience i.e., Sprint Bioscience and Diadrom Holding go up and down completely randomly.

Pair Corralation between Sprint Bioscience and Diadrom Holding

Assuming the 90 days trading horizon Sprint Bioscience AB is expected to generate 1.7 times more return on investment than Diadrom Holding. However, Sprint Bioscience is 1.7 times more volatile than Diadrom Holding AB. It trades about 0.01 of its potential returns per unit of risk. Diadrom Holding AB is currently generating about -0.02 per unit of risk. If you would invest  178.00  in Sprint Bioscience AB on December 3, 2024 and sell it today you would lose (36.00) from holding Sprint Bioscience AB or give up 20.22% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.14%
Values	Daily Returns

Sprint Bioscience AB  vs.  Diadrom Holding AB

Sprint Bioscience

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sprint Bioscience AB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Diadrom Holding AB

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Diadrom Holding AB are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Diadrom Holding may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Sprint Bioscience and Diadrom Holding

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

The idea behind Sprint Bioscience AB and Diadrom Holding 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.