Correlation Between THORNEY TECHS and SYSTEMAIR

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

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

Diversification Opportunities for THORNEY TECHS and SYSTEMAIR

-0.21

Correlation Coefficient

THORNEY TECHS  SYSTEMAIR

Very good diversification

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

Pair Corralation between THORNEY TECHS and SYSTEMAIR

Assuming the 90 days horizon THORNEY TECHS is expected to generate 1.53 times less return on investment than SYSTEMAIR. In addition to that, THORNEY TECHS is 1.56 times more volatile than SYSTEMAIR AB. It trades about 0.04 of its total potential returns per unit of risk. SYSTEMAIR AB is currently generating about 0.1 per unit of volatility. If you would invest  569.00  in SYSTEMAIR AB on September 12, 2024 and sell it today you would earn a total of  239.00  from holding SYSTEMAIR AB or generate 42.0% return on investment over 90 days.

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

THORNEY TECHS LTD  vs.  SYSTEMAIR AB

THORNEY TECHS LTD

Risk-Adjusted Performance

2 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in THORNEY TECHS LTD are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, THORNEY TECHS may actually be approaching a critical reversion point that can send shares even higher in January 2025.

SYSTEMAIR AB

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SYSTEMAIR AB are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, SYSTEMAIR may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with THORNEY TECHS and SYSTEMAIR

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

The idea behind THORNEY TECHS LTD and SYSTEMAIR 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.