Correlation Between Indutrade and RATIONAL UNADR

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

By analyzing existing cross correlation between Indutrade AB and RATIONAL UNADR 1, you can compare the effects of market volatilities on Indutrade and RATIONAL UNADR 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 Indutrade with a short position of RATIONAL UNADR. Check out your portfolio center. Please also check ongoing floating volatility patterns of Indutrade and RATIONAL UNADR.

Diversification Opportunities for Indutrade and RATIONAL UNADR

0.52

Correlation Coefficient

Indutrade  RATIONAL UNADR

Very weak diversification

The 3 months correlation between Indutrade and RATIONAL is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Indutrade AB and RATIONAL UNADR 1 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RATIONAL UNADR 1 and Indutrade 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 Indutrade AB are associated (or correlated) with RATIONAL UNADR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RATIONAL UNADR 1 has no effect on the direction of Indutrade i.e., Indutrade and RATIONAL UNADR go up and down completely randomly.

Pair Corralation between Indutrade and RATIONAL UNADR

Assuming the 90 days horizon Indutrade AB is expected to generate 0.7 times more return on investment than RATIONAL UNADR. However, Indutrade AB is 1.44 times less risky than RATIONAL UNADR. It trades about 0.05 of its potential returns per unit of risk. RATIONAL UNADR 1 is currently generating about -0.18 per unit of risk. If you would invest  2,352  in Indutrade AB on September 27, 2024 and sell it today you would earn a total of  28.00  from holding Indutrade AB or generate 1.19% return on investment over 90 days.

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

Indutrade AB  vs.  RATIONAL UNADR 1

Indutrade AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Indutrade 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 January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

RATIONAL UNADR 1

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days RATIONAL UNADR 1 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, RATIONAL UNADR is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Indutrade and RATIONAL UNADR

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

The idea behind Indutrade AB and RATIONAL UNADR 1 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.