Correlation Between Industrivarden and Gapwaves

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

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

Diversification Opportunities for Industrivarden and Gapwaves

0.25

Correlation Coefficient

Industrivarden  Gapwaves

Modest diversification

The 3 months correlation between Industrivarden and Gapwaves is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Industrivarden AB ser and Gapwaves AB Series in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gapwaves AB Series and Industrivarden 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 Industrivarden AB ser are associated (or correlated) with Gapwaves. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gapwaves AB Series has no effect on the direction of Industrivarden i.e., Industrivarden and Gapwaves go up and down completely randomly.

Pair Corralation between Industrivarden and Gapwaves

Assuming the 90 days trading horizon Industrivarden AB ser is expected to generate 0.21 times more return on investment than Gapwaves. However, Industrivarden AB ser is 4.69 times less risky than Gapwaves. It trades about -0.12 of its potential returns per unit of risk. Gapwaves AB Series is currently generating about -0.04 per unit of risk. If you would invest  37,520  in Industrivarden AB ser on September 28, 2024 and sell it today you would lose (2,840) from holding Industrivarden AB ser or give up 7.57% of portfolio value over 90 days.

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

Industrivarden AB ser  vs.  Gapwaves AB Series

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 latest uncertain performance, the Stock's fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

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 latest uncertain performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Industrivarden and Gapwaves

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

The idea behind Industrivarden AB ser and Gapwaves AB Series 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.