Correlation Between Proact IT and Rottneros
Can any of the company-specific risk be diversified away by investing in both Proact IT and Rottneros 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 Proact IT and Rottneros into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Proact IT Group and Rottneros AB, you can compare the effects of market volatilities on Proact IT and Rottneros 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 Proact IT with a short position of Rottneros. Check out your portfolio center. Please also check ongoing floating volatility patterns of Proact IT and Rottneros.
Diversification Opportunities for Proact IT and Rottneros
Almost no diversification
The 3 months correlation between Proact and Rottneros is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Proact IT Group and Rottneros AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rottneros AB and Proact IT 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 Proact IT Group are associated (or correlated) with Rottneros. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rottneros AB has no effect on the direction of Proact IT i.e., Proact IT and Rottneros go up and down completely randomly.
Pair Corralation between Proact IT and Rottneros
Assuming the 90 days trading horizon Proact IT Group is expected to generate 1.2 times more return on investment than Rottneros. However, Proact IT is 1.2 times more volatile than Rottneros AB. It trades about -0.04 of its potential returns per unit of risk. Rottneros AB is currently generating about -0.15 per unit of risk. If you would invest 14,580 in Proact IT Group on September 1, 2024 and sell it today you would lose (1,340) from holding Proact IT Group or give up 9.19% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Proact IT Group vs. Rottneros AB
Performance |
| Timeline |
| Proact IT Group |
| Rottneros AB |
Proact IT and Rottneros Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Proact IT and Rottneros
The main advantage of trading using opposite Proact IT and Rottneros positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Proact IT position performs unexpectedly, Rottneros 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 Rottneros will offset losses from the drop in Rottneros' long position.| Proact IT vs. Enea AB | Proact IT vs. Novotek AB | Proact IT vs. Addnode Group AB | Proact IT vs. Softronic AB |
| Rottneros vs. Holmen AB | Rottneros vs. Svenska Cellulosa Aktiebolaget | Rottneros vs. Husqvarna AB | Rottneros vs. Alfa Laval AB |
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 Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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