Correlation Between XXL ASA and Photocure
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
Average diversification
The 3 months correlation between XXL and Photocure is 0.17. 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 3.42 times more volatile than Photocure. It trades about -0.14 of its total potential returns per unit of risk. Photocure is currently generating about -0.05 per unit of volatility. If you would invest 6,530 in Photocure on September 8, 2024 and sell it today you would lose (1,100) from holding Photocure or give up 16.85% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
XXL ASA vs. Photocure
Performance |
Timeline |
XXL ASA |
Photocure |
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.Photocure vs. Sparebank 1 SMN | Photocure vs. Romerike Sparebank | Photocure vs. Aurskog Sparebank | Photocure vs. Pareto Bank ASA |
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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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