Correlation Between XXL ASA and Photocure

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Can any of the company-specific risk be diversified away by investing in both XXL ASA and Photocure 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 XXL ASA and Photocure into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between XXL ASA and Photocure, you can compare the effects of market volatilities on XXL ASA and Photocure 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 XXL ASA with a short position of Photocure. Check out your portfolio center. Please also check ongoing floating volatility patterns of XXL ASA and Photocure.

Diversification Opportunities for XXL ASA and Photocure

0.23
  Correlation Coefficient

Modest diversification

The 3 months correlation between XXL and Photocure is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding XXL ASA and Photocure in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Photocure and XXL ASA 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 XXL ASA are associated (or correlated) with Photocure. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Photocure has no effect on the direction of XXL ASA i.e., XXL ASA and Photocure go up and down completely randomly.

Pair Corralation between XXL ASA and Photocure

Assuming the 90 days trading horizon XXL ASA is expected to under-perform the Photocure. In addition to that, XXL ASA is 4.92 times more volatile than Photocure. It trades about -0.24 of its total potential returns per unit of risk. Photocure is currently generating about 0.01 per unit of volatility. If you would invest  5,040  in Photocure on September 6, 2024 and sell it today you would earn a total of  0.00  from holding Photocure or generate 0.0% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

XXL ASA  vs.  Photocure

 Performance 
       Timeline  
XXL ASA 

Risk-Adjusted Performance

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Weak
 
Strong
Very Weak
Over the last 90 days XXL ASA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's essential indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.
Photocure 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Photocure has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Photocure is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

XXL ASA and Photocure Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with XXL ASA and Photocure

The main advantage of trading using opposite XXL ASA and Photocure positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if XXL ASA position performs unexpectedly, Photocure 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 Photocure will offset losses from the drop in Photocure's long position.
The idea behind XXL ASA and Photocure 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.
Check out your portfolio center.
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.

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