Correlation Between Ratos AB and Bure Equity

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

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

Diversification Opportunities for Ratos AB and Bure Equity

0.86

Correlation Coefficient

Ratos AB  Bure Equity

Very poor diversification

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

Pair Corralation between Ratos AB and Bure Equity

Assuming the 90 days trading horizon Ratos AB is expected to generate 1.58 times less return on investment than Bure Equity. In addition to that, Ratos AB is 1.4 times more volatile than Bure Equity AB. It trades about 0.12 of its total potential returns per unit of risk. Bure Equity AB is currently generating about 0.27 per unit of volatility. If you would invest  34,025  in Bure Equity AB on March 3, 2024 and sell it today you would earn a total of  2,475  from holding Bure Equity AB or generate 7.27% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.45%
Values	Daily Returns

Ratos AB  vs.  Bure Equity AB

Ratos AB

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ratos AB are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Ratos AB sustained solid returns over the last few months and may actually be approaching a breakup point.

Bure Equity AB

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bure Equity AB are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Bure Equity may actually be approaching a critical reversion point that can send shares even higher in July 2024.

Pair Trading with Ratos AB and Bure Equity

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

The idea behind Ratos AB and Bure Equity 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.