Correlation Between W5 Solutions and Truecaller

Can any of the company-specific risk be diversified away by investing in both W5 Solutions and Truecaller 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 W5 Solutions and Truecaller into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between W5 Solutions AB and Truecaller AB, you can compare the effects of market volatilities on W5 Solutions and Truecaller 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 W5 Solutions with a short position of Truecaller. Check out your portfolio center. Please also check ongoing floating volatility patterns of W5 Solutions and Truecaller.

Diversification Opportunities for W5 Solutions and Truecaller

-0.53

Correlation Coefficient

W5 Solutions  Truecaller

Excellent diversification

The 3 months correlation between W5 Solutions and Truecaller is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding W5 Solutions AB and Truecaller AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Truecaller AB and W5 Solutions 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 W5 Solutions AB are associated (or correlated) with Truecaller. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Truecaller AB has no effect on the direction of W5 Solutions i.e., W5 Solutions and Truecaller go up and down completely randomly.

Pair Corralation between W5 Solutions and Truecaller

Assuming the 90 days horizon W5 Solutions AB is expected to under-perform the Truecaller. In addition to that, W5 Solutions is 1.13 times more volatile than Truecaller AB. It trades about -0.01 of its total potential returns per unit of risk. Truecaller AB is currently generating about 0.21 per unit of volatility. If you would invest  3,722  in Truecaller AB on September 12, 2024 and sell it today you would earn a total of  1,628  from holding Truecaller AB or generate 43.74% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.46%
Values	Daily Returns

W5 Solutions AB  vs.  Truecaller AB

W5 Solutions AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days W5 Solutions AB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, W5 Solutions is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Truecaller AB

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Truecaller AB are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Truecaller sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with W5 Solutions and Truecaller

The main advantage of trading using opposite W5 Solutions and Truecaller positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if W5 Solutions position performs unexpectedly, Truecaller 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 Truecaller will offset losses from the drop in Truecaller's long position.

The idea behind W5 Solutions AB and Truecaller 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.