Correlation Between Real Heart and Freemelt Holding

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

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

Diversification Opportunities for Real Heart and Freemelt Holding

-0.66

Correlation Coefficient

Real Heart  Freemelt Holding

Excellent diversification

The 3 months correlation between Real and Freemelt is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Real Heart and Freemelt Holding AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Freemelt Holding and Real Heart 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 Real Heart are associated (or correlated) with Freemelt Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Freemelt Holding has no effect on the direction of Real Heart i.e., Real Heart and Freemelt Holding go up and down completely randomly.

Pair Corralation between Real Heart and Freemelt Holding

Assuming the 90 days trading horizon Real Heart is expected to generate 25.5 times less return on investment than Freemelt Holding. But when comparing it to its historical volatility, Real Heart is 2.21 times less risky than Freemelt Holding. It trades about 0.02 of its potential returns per unit of risk. Freemelt Holding AB is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  101.00  in Freemelt Holding AB on April 24, 2025 and sell it today you would earn a total of  161.00  from holding Freemelt Holding AB or generate 159.41% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.36%
Values	Daily Returns

Real Heart  vs.  Freemelt Holding AB

Real Heart

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Real Heart are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Real Heart is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Freemelt Holding

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Freemelt Holding AB are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Freemelt Holding unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Real Heart and Freemelt Holding

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

The idea behind Real Heart and Freemelt Holding 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.