Correlation Between Paxman AB and Dignitana
Can any of the company-specific risk be diversified away by investing in both Paxman AB and Dignitana 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 Paxman AB and Dignitana into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Paxman AB and Dignitana AB, you can compare the effects of market volatilities on Paxman AB and Dignitana 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 Paxman AB with a short position of Dignitana. Check out your portfolio center. Please also check ongoing floating volatility patterns of Paxman AB and Dignitana.
Diversification Opportunities for Paxman AB and Dignitana
Very weak diversification
The 3 months correlation between Paxman and Dignitana is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Paxman AB and Dignitana AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dignitana AB and Paxman AB 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 Paxman AB are associated (or correlated) with Dignitana. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dignitana AB has no effect on the direction of Paxman AB i.e., Paxman AB and Dignitana go up and down completely randomly.
Pair Corralation between Paxman AB and Dignitana
Assuming the 90 days trading horizon Paxman AB is expected to generate 0.53 times more return on investment than Dignitana. However, Paxman AB is 1.88 times less risky than Dignitana. It trades about 0.07 of its potential returns per unit of risk. Dignitana AB is currently generating about -0.17 per unit of risk. If you would invest 6,720 in Paxman AB on August 28, 2024 and sell it today you would earn a total of 280.00 from holding Paxman AB or generate 4.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Paxman AB vs. Dignitana AB
Performance |
| Timeline |
| Paxman AB |
| Dignitana AB |
Paxman AB and Dignitana Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Paxman AB and Dignitana
The main advantage of trading using opposite Paxman AB and Dignitana positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Paxman AB position performs unexpectedly, Dignitana 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 Dignitana will offset losses from the drop in Dignitana's long position.The idea behind Paxman AB and Dignitana 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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