Correlation Between Divio Technologies and 4C Group

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Can any of the company-specific risk be diversified away by investing in both Divio Technologies and 4C Group 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 Divio Technologies and 4C Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Divio Technologies AB and 4C Group AB, you can compare the effects of market volatilities on Divio Technologies and 4C Group 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 Divio Technologies with a short position of 4C Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Divio Technologies and 4C Group.

Diversification Opportunities for Divio Technologies and 4C Group

0.8
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Divio and 4C Group is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Divio Technologies AB and 4C Group AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 4C Group AB and Divio Technologies 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 Divio Technologies AB are associated (or correlated) with 4C Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 4C Group AB has no effect on the direction of Divio Technologies i.e., Divio Technologies and 4C Group go up and down completely randomly.

Pair Corralation between Divio Technologies and 4C Group

Assuming the 90 days trading horizon Divio Technologies AB is expected to generate 2.02 times more return on investment than 4C Group. However, Divio Technologies is 2.02 times more volatile than 4C Group AB. It trades about -0.03 of its potential returns per unit of risk. 4C Group AB is currently generating about -0.38 per unit of risk. If you would invest  15.00  in Divio Technologies AB on September 25, 2024 and sell it today you would lose (1.00) from holding Divio Technologies AB or give up 6.67% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy95.45%
ValuesDaily Returns

Divio Technologies AB  vs.  4C Group AB

 Performance 
       Timeline  
Divio Technologies 

Risk-Adjusted Performance

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Very Weak
Over the last 90 days Divio Technologies 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 forward indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.
4C Group AB 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days 4C Group AB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Divio Technologies and 4C Group Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Divio Technologies and 4C Group

The main advantage of trading using opposite Divio Technologies and 4C Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Divio Technologies position performs unexpectedly, 4C Group 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 4C Group will offset losses from the drop in 4C Group's long position.
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The idea behind Divio Technologies AB and 4C Group 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.

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