Correlation Between Gapwaves and Industrivarden

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

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

Diversification Opportunities for Gapwaves and Industrivarden

0.29

Correlation Coefficient

Gapwaves  Industrivarden

Modest diversification

The 3 months correlation between Gapwaves and Industrivarden is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Gapwaves AB Series 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 Gapwaves 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 Gapwaves AB Series 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 Gapwaves i.e., Gapwaves and Industrivarden go up and down completely randomly.

Pair Corralation between Gapwaves and Industrivarden

Assuming the 90 days trading horizon Gapwaves AB Series is expected to under-perform the Industrivarden. In addition to that, Gapwaves is 4.53 times more volatile than Industrivarden AB ser. It trades about -0.05 of its total potential returns per unit of risk. Industrivarden AB ser is currently generating about -0.01 per unit of volatility. If you would invest  36,400  in Industrivarden AB ser on October 16, 2024 and sell it today you would lose (340.00) from holding Industrivarden AB ser or give up 0.93% of portfolio value over 90 days.

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

Gapwaves AB Series  vs.  Industrivarden AB ser

Gapwaves AB Series

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gapwaves AB Series has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Industrivarden AB ser

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Industrivarden AB ser has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental indicators, Industrivarden is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Gapwaves and Industrivarden

The main advantage of trading using opposite Gapwaves and Industrivarden positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gapwaves 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 Gapwaves AB Series 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.

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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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.