Correlation Between Sectra AB and Vimian Group

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

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

Diversification Opportunities for Sectra AB and Vimian Group

0.72

Correlation Coefficient

Sectra AB  Vimian Group

Poor diversification

The 3 months correlation between Sectra and Vimian is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Sectra AB and Vimian Group AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vimian Group AB and Sectra 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 Sectra AB are associated (or correlated) with Vimian Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vimian Group AB has no effect on the direction of Sectra AB i.e., Sectra AB and Vimian Group go up and down completely randomly.

Pair Corralation between Sectra AB and Vimian Group

Assuming the 90 days trading horizon Sectra AB is expected to generate 0.67 times more return on investment than Vimian Group. However, Sectra AB is 1.48 times less risky than Vimian Group. It trades about 0.08 of its potential returns per unit of risk. Vimian Group AB is currently generating about 0.05 per unit of risk. If you would invest  12,144  in Sectra AB on June 29, 2024 and sell it today you would earn a total of  14,596  from holding Sectra AB or generate 120.19% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.8%
Values	Daily Returns

Sectra AB  vs.  Vimian Group AB

Sectra AB

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sectra AB are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain fundamental indicators, Sectra AB may actually be approaching a critical reversion point that can send shares even higher in October 2024.

Vimian Group AB

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vimian Group AB are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak primary indicators, Vimian Group sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sectra AB and Vimian Group

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

The idea behind Sectra AB and Vimian Group 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.