Correlation Between Probi AB and Sectra AB
Can any of the company-specific risk be diversified away by investing in both Probi AB and Sectra 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 Probi AB and Sectra AB into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Probi AB and Sectra AB, you can compare the effects of market volatilities on Probi AB and Sectra 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 Probi AB with a short position of Sectra AB. Check out your portfolio center. Please also check ongoing floating volatility patterns of Probi AB and Sectra AB.
Diversification Opportunities for Probi AB and Sectra AB
Average diversification
The 3 months correlation between Probi and Sectra is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Probi AB and Sectra AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sectra AB and Probi 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 Probi AB are associated (or correlated) with Sectra AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sectra AB has no effect on the direction of Probi AB i.e., Probi AB and Sectra AB go up and down completely randomly.
Pair Corralation between Probi AB and Sectra AB
Assuming the 90 days trading horizon Probi AB is expected to generate 5.24 times more return on investment than Sectra AB. However, Probi AB is 5.24 times more volatile than Sectra AB. It trades about 0.14 of its potential returns per unit of risk. Sectra AB is currently generating about 0.02 per unit of risk. If you would invest 27,900 in Probi AB on September 1, 2024 and sell it today you would earn a total of 6,800 from holding Probi AB or generate 24.37% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Probi AB vs. Sectra AB
Performance |
| Timeline |
| Probi AB |
| Sectra AB |
Probi AB and Sectra AB Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Probi AB and Sectra AB
The main advantage of trading using opposite Probi AB and Sectra AB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Probi AB position performs unexpectedly, Sectra 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 Sectra AB will offset losses from the drop in Sectra AB's long position.The idea behind Probi AB and Sectra 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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