Correlation Between Troax Group and Cavotec SA

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

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

Diversification Opportunities for Troax Group and Cavotec SA

0.42

Correlation Coefficient

Troax Group  Cavotec SA

Very weak diversification

The 3 months correlation between Troax and Cavotec is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Troax Group AB and Cavotec SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cavotec SA and Troax Group 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 Troax Group AB are associated (or correlated) with Cavotec SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cavotec SA has no effect on the direction of Troax Group i.e., Troax Group and Cavotec SA go up and down completely randomly.

Pair Corralation between Troax Group and Cavotec SA

Assuming the 90 days trading horizon Troax Group is expected to generate 57.09 times less return on investment than Cavotec SA. But when comparing it to its historical volatility, Troax Group AB is 1.39 times less risky than Cavotec SA. It trades about 0.0 of its potential returns per unit of risk. Cavotec SA is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  1,620  in Cavotec SA on April 22, 2025 and sell it today you would earn a total of  280.00  from holding Cavotec SA or generate 17.28% return on investment over 90 days.

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

Troax Group AB  vs.  Cavotec SA

Troax Group AB

Risk-Adjusted Performance

Very Weak

Over the last 90 days Troax Group AB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Troax Group is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Cavotec SA

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Cavotec SA are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain fundamental indicators, Cavotec SA unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Troax Group and Cavotec SA

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

The idea behind Troax Group AB and Cavotec SA 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.