Correlation Between Proact IT and Studsvik
Can any of the company-specific risk be diversified away by investing in both Proact IT and Studsvik 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 Studsvik 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 Studsvik AB, you can compare the effects of market volatilities on Proact IT and Studsvik 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 Studsvik. Check out your portfolio center. Please also check ongoing floating volatility patterns of Proact IT and Studsvik.
Diversification Opportunities for Proact IT and Studsvik
Poor diversification
The 3 months correlation between Proact and Studsvik is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Proact IT Group and Studsvik AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Studsvik 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 Studsvik. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Studsvik AB has no effect on the direction of Proact IT i.e., Proact IT and Studsvik go up and down completely randomly.
Pair Corralation between Proact IT and Studsvik
Assuming the 90 days trading horizon Proact IT Group is expected to under-perform the Studsvik. In addition to that, Proact IT is 5.77 times more volatile than Studsvik AB. It trades about -0.15 of its total potential returns per unit of risk. Studsvik AB is currently generating about 0.07 per unit of volatility. If you would invest 11,980 in Studsvik AB on October 10, 2024 and sell it today you would earn a total of 100.00 from holding Studsvik AB or generate 0.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Proact IT Group vs. Studsvik AB
Performance |
| Timeline |
| Proact IT Group |
| Studsvik AB |
Proact IT and Studsvik Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Proact IT and Studsvik
The main advantage of trading using opposite Proact IT and Studsvik positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Proact IT position performs unexpectedly, Studsvik 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 Studsvik will offset losses from the drop in Studsvik's long position.The idea behind Proact IT Group and Studsvik 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.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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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