Correlation Between Troax Group and Addnode Group

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

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

Diversification Opportunities for Troax Group and Addnode Group

0.04

Correlation Coefficient

Troax Group  Addnode Group

Significant diversification

The 3 months correlation between Troax and Addnode is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Troax Group AB and Addnode Group AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Addnode Group AB and Troax Group 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 Troax Group AB are associated (or correlated) with Addnode Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Addnode Group AB has no effect on the direction of Troax Group i.e., Troax Group and Addnode Group go up and down completely randomly.

Pair Corralation between Troax Group and Addnode Group

Assuming the 90 days trading horizon Troax Group AB is expected to generate 0.95 times more return on investment than Addnode Group. However, Troax Group AB is 1.06 times less risky than Addnode Group. It trades about -0.04 of its potential returns per unit of risk. Addnode Group AB is currently generating about -0.05 per unit of risk. If you would invest  22,200  in Troax Group AB on September 2, 2024 and sell it today you would lose (1,350) from holding Troax Group AB or give up 6.08% of portfolio value over 90 days.

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

Troax Group AB  vs.  Addnode Group AB

Troax Group AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Troax Group AB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Troax Group is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Addnode Group AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Addnode Group AB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Addnode Group is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Troax Group and Addnode Group

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

The idea behind Troax Group AB and Addnode Group 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.