Correlation Between ASSA ABLOY and Guard Therapeutics

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

By analyzing existing cross correlation between ASSA ABLOY AB and Guard Therapeutics International, you can compare the effects of market volatilities on ASSA ABLOY and Guard Therapeutics 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 ASSA ABLOY with a short position of Guard Therapeutics. Check out your portfolio center. Please also check ongoing floating volatility patterns of ASSA ABLOY and Guard Therapeutics.

Diversification Opportunities for ASSA ABLOY and Guard Therapeutics

0.2

Correlation Coefficient

ASSA ABLOY  Guard Therapeutics

Modest diversification

The 3 months correlation between ASSA and Guard is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding ASSA ABLOY AB and Guard Therapeutics Internation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guard Therapeutics and ASSA ABLOY 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 ASSA ABLOY AB are associated (or correlated) with Guard Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guard Therapeutics has no effect on the direction of ASSA ABLOY i.e., ASSA ABLOY and Guard Therapeutics go up and down completely randomly.

Pair Corralation between ASSA ABLOY and Guard Therapeutics

Assuming the 90 days trading horizon ASSA ABLOY is expected to generate 14.64 times less return on investment than Guard Therapeutics. But when comparing it to its historical volatility, ASSA ABLOY AB is 4.35 times less risky than Guard Therapeutics. It trades about 0.09 of its potential returns per unit of risk. Guard Therapeutics International is currently generating about 0.31 of returns per unit of risk over similar time horizon. If you would invest  1,890  in Guard Therapeutics International on February 13, 2024 and sell it today you would earn a total of  1,410  from holding Guard Therapeutics International or generate 74.6% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

ASSA ABLOY AB  vs.  Guard Therapeutics Internation

ASSA ABLOY AB

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ASSA ABLOY AB are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, ASSA ABLOY sustained solid returns over the last few months and may actually be approaching a breakup point.

Guard Therapeutics

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Guard Therapeutics International are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain fundamental indicators, Guard Therapeutics unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ASSA ABLOY and Guard Therapeutics

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

The idea behind ASSA ABLOY AB and Guard Therapeutics International 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.