Correlation Between Hanza AB and Smart Eye

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

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

Diversification Opportunities for Hanza AB and Smart Eye

-0.72

Correlation Coefficient

Hanza AB  Smart Eye

Pay attention - limited upside

The 3 months correlation between Hanza and Smart is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Hanza AB and Smart Eye AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Smart Eye AB and Hanza 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 Hanza AB are associated (or correlated) with Smart Eye. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Smart Eye AB has no effect on the direction of Hanza AB i.e., Hanza AB and Smart Eye go up and down completely randomly.

Pair Corralation between Hanza AB and Smart Eye

Assuming the 90 days trading horizon Hanza AB is expected to generate 1.2 times more return on investment than Smart Eye. However, Hanza AB is 1.2 times more volatile than Smart Eye AB. It trades about 0.23 of its potential returns per unit of risk. Smart Eye AB is currently generating about -0.01 per unit of risk. If you would invest  6,750  in Hanza AB on September 27, 2024 and sell it today you would earn a total of  770.00  from holding Hanza AB or generate 11.41% return on investment over 90 days.

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

Hanza AB  vs.  Smart Eye AB

Hanza AB

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Hanza AB are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Hanza AB unveiled solid returns over the last few months and may actually be approaching a breakup point.

Smart Eye AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Smart Eye AB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Hanza AB and Smart Eye

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

The idea behind Hanza AB and Smart Eye 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.