Correlation Between Rottneros and Proact IT
Can any of the company-specific risk be diversified away by investing in both Rottneros and Proact IT 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 Rottneros and Proact IT into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Rottneros AB and Proact IT Group, you can compare the effects of market volatilities on Rottneros and Proact IT 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 Rottneros with a short position of Proact IT. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rottneros and Proact IT.
Diversification Opportunities for Rottneros and Proact IT
Almost no diversification
The 3 months correlation between Rottneros and Proact is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Rottneros AB and Proact IT Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Proact IT Group and Rottneros 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 Rottneros AB are associated (or correlated) with Proact IT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Proact IT Group has no effect on the direction of Rottneros i.e., Rottneros and Proact IT go up and down completely randomly.
Pair Corralation between Rottneros and Proact IT
Assuming the 90 days trading horizon Rottneros AB is expected to under-perform the Proact IT. In addition to that, Rottneros is 1.86 times more volatile than Proact IT Group. It trades about -0.08 of its total potential returns per unit of risk. Proact IT Group is currently generating about -0.11 per unit of volatility. If you would invest 13,620 in Proact IT Group on September 1, 2024 and sell it today you would lose (380.00) from holding Proact IT Group or give up 2.79% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Rottneros AB vs. Proact IT Group
Performance |
| Timeline |
| Rottneros AB |
| Proact IT Group |
Rottneros and Proact IT Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Rottneros and Proact IT
The main advantage of trading using opposite Rottneros and Proact IT positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rottneros position performs unexpectedly, Proact IT 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 Proact IT will offset losses from the drop in Proact IT's long position.| Rottneros vs. Holmen AB | Rottneros vs. Svenska Cellulosa Aktiebolaget | Rottneros vs. Husqvarna AB | Rottneros vs. Alfa Laval AB |
| Proact IT vs. Enea AB | Proact IT vs. Novotek AB | Proact IT vs. Addnode Group AB | Proact IT vs. Softronic 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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