Correlation Between Hexagon AB and Idun Industrier

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

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

Diversification Opportunities for Hexagon AB and Idun Industrier

0.83

Correlation Coefficient

Hexagon AB  Idun Industrier

Very poor diversification

The 3 months correlation between Hexagon and Idun is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Hexagon AB and Idun Industrier AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Idun Industrier AB and Hexagon 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 Hexagon AB are associated (or correlated) with Idun Industrier. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Idun Industrier AB has no effect on the direction of Hexagon AB i.e., Hexagon AB and Idun Industrier go up and down completely randomly.

Pair Corralation between Hexagon AB and Idun Industrier

Assuming the 90 days trading horizon Hexagon AB is expected to generate 1.01 times more return on investment than Idun Industrier. However, Hexagon AB is 1.01 times more volatile than Idun Industrier AB. It trades about 0.26 of its potential returns per unit of risk. Idun Industrier AB is currently generating about 0.15 per unit of risk. If you would invest  9,294  in Hexagon AB on November 29, 2024 and sell it today you would earn a total of  3,021  from holding Hexagon AB or generate 32.5% return on investment over 90 days.

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

Hexagon AB  vs.  Idun Industrier AB

Hexagon AB

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Hexagon AB are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hexagon AB sustained solid returns over the last few months and may actually be approaching a breakup point.

Idun Industrier AB

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Idun Industrier AB are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Idun Industrier sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hexagon AB and Idun Industrier

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

The idea behind Hexagon AB and Idun Industrier 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 CEOs Directory module to screen CEOs from public companies around the world.