Correlation Between Heimstaden and RaySearch Laboratories

Can any of the company-specific risk be diversified away by investing in both Heimstaden and RaySearch Laboratories 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 Heimstaden and RaySearch Laboratories into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Heimstaden AB Pfd and RaySearch Laboratories AB, you can compare the effects of market volatilities on Heimstaden and RaySearch Laboratories 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 Heimstaden with a short position of RaySearch Laboratories. Check out your portfolio center. Please also check ongoing floating volatility patterns of Heimstaden and RaySearch Laboratories.

Diversification Opportunities for Heimstaden and RaySearch Laboratories

-0.86

Correlation Coefficient

Heimstaden  RaySearch Laboratories

Pay attention - limited upside

The 3 months correlation between Heimstaden and RaySearch is -0.86. Overlapping area represents the amount of risk that can be diversified away by holding Heimstaden AB Pfd and RaySearch Laboratories AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RaySearch Laboratories and Heimstaden 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 Heimstaden AB Pfd are associated (or correlated) with RaySearch Laboratories. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RaySearch Laboratories has no effect on the direction of Heimstaden i.e., Heimstaden and RaySearch Laboratories go up and down completely randomly.

Pair Corralation between Heimstaden and RaySearch Laboratories

Assuming the 90 days trading horizon Heimstaden AB Pfd is expected to under-perform the RaySearch Laboratories. In addition to that, Heimstaden is 1.57 times more volatile than RaySearch Laboratories AB. It trades about -0.05 of its total potential returns per unit of risk. RaySearch Laboratories AB is currently generating about 0.08 per unit of volatility. If you would invest  7,890  in RaySearch Laboratories AB on February 5, 2024 and sell it today you would earn a total of  3,950  from holding RaySearch Laboratories AB or generate 50.06% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Heimstaden AB Pfd  vs.  RaySearch Laboratories AB

Heimstaden AB Pfd

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Heimstaden AB Pfd has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in June 2024. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

RaySearch Laboratories

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in RaySearch Laboratories AB are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain fundamental drivers, RaySearch Laboratories unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Heimstaden and RaySearch Laboratories

The main advantage of trading using opposite Heimstaden and RaySearch Laboratories positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Heimstaden position performs unexpectedly, RaySearch Laboratories 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 RaySearch Laboratories will offset losses from the drop in RaySearch Laboratories' long position.

The idea behind Heimstaden AB Pfd and RaySearch Laboratories 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.

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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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.