Correlation Between Hufvudstaden and Information Services

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

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

Diversification Opportunities for Hufvudstaden and Information Services

-0.05

Correlation Coefficient

Hufvudstaden  Information Services

Good diversification

The 3 months correlation between Hufvudstaden and Information is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Hufvudstaden AB and Information Services Internati in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Information Services and Hufvudstaden 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 Hufvudstaden AB are associated (or correlated) with Information Services. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Information Services has no effect on the direction of Hufvudstaden i.e., Hufvudstaden and Information Services go up and down completely randomly.

Pair Corralation between Hufvudstaden and Information Services

Assuming the 90 days trading horizon Hufvudstaden AB is expected to under-perform the Information Services. But the stock apears to be less risky and, when comparing its historical volatility, Hufvudstaden AB is 1.4 times less risky than Information Services. The stock trades about -0.13 of its potential returns per unit of risk. The Information Services International Dentsu is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  3,480  in Information Services International Dentsu on October 4, 2024 and sell it today you would earn a total of  40.00  from holding Information Services International Dentsu or generate 1.15% return on investment over 90 days.

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

Hufvudstaden AB  vs.  Information Services Internati

Hufvudstaden AB

Risk-Adjusted Performance

0 of 100

Very Weak

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

Information Services

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Information Services International Dentsu are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Information Services may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Hufvudstaden and Information Services

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

The idea behind Hufvudstaden AB and Information Services International Dentsu 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.