Correlation Between Troax Group and Garo AB

Can any of the company-specific risk be diversified away by investing in both Troax Group and Garo AB 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 Garo AB 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 Garo AB, you can compare the effects of market volatilities on Troax Group and Garo AB 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 Garo AB. Check out your portfolio center. Please also check ongoing floating volatility patterns of Troax Group and Garo AB.

Diversification Opportunities for Troax Group and Garo AB

-0.13

Correlation Coefficient

Troax Group  Garo AB

Good diversification

The 3 months correlation between Troax and Garo is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Troax Group AB and Garo AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Garo 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 Garo AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Garo AB has no effect on the direction of Troax Group i.e., Troax Group and Garo AB go up and down completely randomly.

Pair Corralation between Troax Group and Garo AB

Assuming the 90 days trading horizon Troax Group AB is expected to generate 0.67 times more return on investment than Garo AB. However, Troax Group AB is 1.5 times less risky than Garo AB. It trades about -0.04 of its potential returns per unit of risk. Garo AB is currently generating about -0.06 per unit of risk. If you would invest  22,200  in Troax Group AB on August 31, 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 Against
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

Troax Group AB  vs.  Garo 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 current stock price uproar, may contribute to short-horizon losses for the private investors.

Garo AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Garo AB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Troax Group and Garo AB

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

The idea behind Troax Group AB and Garo 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.