Correlation Between USWE Sports and Stille AB

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

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

Diversification Opportunities for USWE Sports and Stille AB

-0.18

Correlation Coefficient

USWE Sports  Stille AB

Good diversification

The 3 months correlation between USWE and Stille is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding USWE Sports AB and Stille AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stille AB and USWE Sports 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 USWE Sports AB are associated (or correlated) with Stille AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stille AB has no effect on the direction of USWE Sports i.e., USWE Sports and Stille AB go up and down completely randomly.

Pair Corralation between USWE Sports and Stille AB

Assuming the 90 days trading horizon USWE Sports AB is expected to under-perform the Stille AB. In addition to that, USWE Sports is 1.52 times more volatile than Stille AB. It trades about -0.05 of its total potential returns per unit of risk. Stille AB is currently generating about 0.08 per unit of volatility. If you would invest  14,800  in Stille AB on October 5, 2024 and sell it today you would earn a total of  6,600  from holding Stille AB or generate 44.59% return on investment over 90 days.

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

USWE Sports AB  vs.  Stille AB

USWE Sports AB

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days USWE Sports AB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively uncertain basic indicators, USWE Sports unveiled solid returns over the last few months and may actually be approaching a breakup point.

Stille AB

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Stille AB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively weak basic indicators, Stille AB may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with USWE Sports and Stille AB

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

The idea behind USWE Sports AB and Stille 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.