Correlation Between EQT AB and Indutrade

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

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

Diversification Opportunities for EQT AB and Indutrade

0.74

Correlation Coefficient

EQT AB  Indutrade

Poor diversification

The 3 months correlation between EQT and Indutrade is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding EQT AB and Indutrade AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Indutrade AB and EQT 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 EQT AB are associated (or correlated) with Indutrade. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Indutrade AB has no effect on the direction of EQT AB i.e., EQT AB and Indutrade go up and down completely randomly.

Pair Corralation between EQT AB and Indutrade

Assuming the 90 days trading horizon EQT AB is expected to generate 1.5 times more return on investment than Indutrade. However, EQT AB is 1.5 times more volatile than Indutrade AB. It trades about 0.02 of its potential returns per unit of risk. Indutrade AB is currently generating about 0.03 per unit of risk. If you would invest  30,610  in EQT AB on December 30, 2024 and sell it today you would earn a total of  610.00  from holding EQT AB or generate 1.99% return on investment over 90 days.

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

EQT AB  vs.  Indutrade AB

EQT AB

Risk-Adjusted Performance

Weak

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

Indutrade AB

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Indutrade AB are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Indutrade is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with EQT AB and Indutrade

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

The idea behind EQT AB and Indutrade 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.

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.