Correlation Between Starbreeze and Paradox Interactive

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

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

Diversification Opportunities for Starbreeze and Paradox Interactive

0.43

Correlation Coefficient

Starbreeze  Paradox Interactive

Very weak diversification

The 3 months correlation between Starbreeze and Paradox is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Starbreeze AB and Paradox Interactive AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Paradox Interactive and Starbreeze 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 Starbreeze AB are associated (or correlated) with Paradox Interactive. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Paradox Interactive has no effect on the direction of Starbreeze i.e., Starbreeze and Paradox Interactive go up and down completely randomly.

Pair Corralation between Starbreeze and Paradox Interactive

Assuming the 90 days trading horizon Starbreeze AB is expected to generate 3.93 times more return on investment than Paradox Interactive. However, Starbreeze is 3.93 times more volatile than Paradox Interactive AB. It trades about 0.19 of its potential returns per unit of risk. Paradox Interactive AB is currently generating about 0.04 per unit of risk. If you would invest  26.00  in Starbreeze AB on February 22, 2024 and sell it today you would earn a total of  7.00  from holding Starbreeze AB or generate 26.92% return on investment over 90 days.

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

Starbreeze AB  vs.  Paradox Interactive AB

Starbreeze AB

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Starbreeze AB are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Starbreeze sustained solid returns over the last few months and may actually be approaching a breakup point.

Paradox Interactive

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Paradox Interactive AB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in June 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Starbreeze and Paradox Interactive

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

The idea behind Starbreeze AB and Paradox Interactive 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.