Correlation Between Creades AB and Industrivarden

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

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

Diversification Opportunities for Creades AB and Industrivarden

0.92

Correlation Coefficient

Creades AB  Industrivarden

Almost no diversification

The 3 months correlation between Creades and Industrivarden is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Creades AB and Industrivarden AB ser in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Industrivarden AB ser and Creades 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 Creades AB are associated (or correlated) with Industrivarden. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Industrivarden AB ser has no effect on the direction of Creades AB i.e., Creades AB and Industrivarden go up and down completely randomly.

Pair Corralation between Creades AB and Industrivarden

Assuming the 90 days trading horizon Creades AB is expected to generate 1.58 times more return on investment than Industrivarden. However, Creades AB is 1.58 times more volatile than Industrivarden AB ser. It trades about 0.14 of its potential returns per unit of risk. Industrivarden AB ser is currently generating about 0.19 per unit of risk. If you would invest  7,064  in Creades AB on December 1, 2024 and sell it today you would earn a total of  941.00  from holding Creades AB or generate 13.32% return on investment over 90 days.

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

Creades AB  vs.  Industrivarden AB ser

Creades AB

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Creades AB are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical and fundamental indicators, Creades AB sustained solid returns over the last few months and may actually be approaching a breakup point.

Industrivarden AB ser

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Industrivarden AB ser are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental indicators, Industrivarden may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Creades AB and Industrivarden

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

The idea behind Creades AB and Industrivarden AB ser 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.

Check out your portfolio center.

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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.