Correlation Between AddLife AB and Inission

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

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

Diversification Opportunities for AddLife AB and Inission

0.63

Correlation Coefficient

AddLife AB  Inission

Poor diversification

The 3 months correlation between AddLife and Inission is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding AddLife AB and Inission AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inission AB and AddLife 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 AddLife AB are associated (or correlated) with Inission. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Inission AB has no effect on the direction of AddLife AB i.e., AddLife AB and Inission go up and down completely randomly.

Pair Corralation between AddLife AB and Inission

Assuming the 90 days trading horizon AddLife AB is expected to generate 1.13 times less return on investment than Inission. In addition to that, AddLife AB is 1.32 times more volatile than Inission AB. It trades about 0.05 of its total potential returns per unit of risk. Inission AB is currently generating about 0.07 per unit of volatility. If you would invest  3,520  in Inission AB on December 25, 2024 and sell it today you would earn a total of  270.00  from holding Inission AB or generate 7.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.33%
Values	Daily Returns

AddLife AB  vs.  Inission AB

AddLife AB

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in AddLife AB are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak forward indicators, AddLife AB may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Inission AB

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Inission AB are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Inission may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with AddLife AB and Inission

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

The idea behind AddLife AB and Inission 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.