Correlation Between Avensia Publ and Prevas AB

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

Diversification Opportunities for Avensia Publ and Prevas AB

0.92
  Correlation Coefficient

Almost no diversification

The 3 months correlation between Avensia and Prevas is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Avensia publ AB and Prevas AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prevas AB and Avensia Publ 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 Avensia publ AB are associated (or correlated) with Prevas AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prevas AB has no effect on the direction of Avensia Publ i.e., Avensia Publ and Prevas AB go up and down completely randomly.

Pair Corralation between Avensia Publ and Prevas AB

Assuming the 90 days trading horizon Avensia publ AB is expected to under-perform the Prevas AB. But the stock apears to be less risky and, when comparing its historical volatility, Avensia publ AB is 1.07 times less risky than Prevas AB. The stock trades about -0.03 of its potential returns per unit of risk. The Prevas AB is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  11,060  in Prevas AB on September 1, 2024 and sell it today you would earn a total of  20.00  from holding Prevas AB or generate 0.18% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

Avensia publ AB  vs.  Prevas AB

 Performance 
       Timeline  
Avensia publ AB 

Risk-Adjusted Performance

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Weak
 
Strong
Very Weak
Over the last 90 days Avensia publ AB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.
Prevas AB 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Prevas AB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's technical and fundamental indicators remain somewhat strong which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Avensia Publ and Prevas AB Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Avensia Publ and Prevas AB

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

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