Correlation Between Xbrane Biopharma and Scandinavian Enviro

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

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

Diversification Opportunities for Xbrane Biopharma and Scandinavian Enviro

0.36

Correlation Coefficient

Xbrane Biopharma  Scandinavian Enviro

Weak diversification

The 3 months correlation between Xbrane and Scandinavian is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Xbrane Biopharma AB and Scandinavian Enviro Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Scandinavian Enviro and Xbrane Biopharma 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 Xbrane Biopharma AB are associated (or correlated) with Scandinavian Enviro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Scandinavian Enviro has no effect on the direction of Xbrane Biopharma i.e., Xbrane Biopharma and Scandinavian Enviro go up and down completely randomly.

Pair Corralation between Xbrane Biopharma and Scandinavian Enviro

Assuming the 90 days trading horizon Xbrane Biopharma AB is expected to generate 2.23 times more return on investment than Scandinavian Enviro. However, Xbrane Biopharma is 2.23 times more volatile than Scandinavian Enviro Systems. It trades about 0.01 of its potential returns per unit of risk. Scandinavian Enviro Systems is currently generating about -0.04 per unit of risk. If you would invest  19.00  in Xbrane Biopharma AB on October 5, 2024 and sell it today you would lose (1.00) from holding Xbrane Biopharma AB or give up 5.26% of portfolio value over 90 days.

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

Xbrane Biopharma AB  vs.  Scandinavian Enviro Systems

Xbrane Biopharma

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Xbrane Biopharma AB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Xbrane Biopharma is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Scandinavian Enviro

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Xbrane Biopharma and Scandinavian Enviro

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

The idea behind Xbrane Biopharma AB and Scandinavian Enviro Systems 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.