Correlation Between TRAVEL + and Addtech AB

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

By analyzing existing cross correlation between TRAVEL LEISURE DL 01 and Addtech AB, you can compare the effects of market volatilities on TRAVEL + and Addtech 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 TRAVEL + with a short position of Addtech AB. Check out your portfolio center. Please also check ongoing floating volatility patterns of TRAVEL + and Addtech AB.

Diversification Opportunities for TRAVEL + and Addtech AB

0.15

Correlation Coefficient

TRAVEL +  Addtech AB

Average diversification

The 3 months correlation between TRAVEL and Addtech is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding TRAVEL LEISURE DL 01 and Addtech AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Addtech AB and TRAVEL + 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 TRAVEL LEISURE DL 01 are associated (or correlated) with Addtech AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Addtech AB has no effect on the direction of TRAVEL + i.e., TRAVEL + and Addtech AB go up and down completely randomly.

Pair Corralation between TRAVEL + and Addtech AB

Assuming the 90 days trading horizon TRAVEL + is expected to generate 1.3 times less return on investment than Addtech AB. But when comparing it to its historical volatility, TRAVEL LEISURE DL 01 is 1.23 times less risky than Addtech AB. It trades about 0.09 of its potential returns per unit of risk. Addtech AB is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  1,698  in Addtech AB on October 9, 2024 and sell it today you would earn a total of  940.00  from holding Addtech AB or generate 55.36% return on investment over 90 days.

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

TRAVEL LEISURE DL 01  vs.  Addtech AB

TRAVEL LEISURE DL

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in TRAVEL LEISURE DL 01 are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, TRAVEL + reported solid returns over the last few months and may actually be approaching a breakup point.

Addtech AB

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Addtech AB are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Addtech AB is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with TRAVEL + and Addtech AB

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

The idea behind TRAVEL LEISURE DL 01 and Addtech 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.