Correlation Between Industrivarden and Creades AB

Can any of the company-specific risk be diversified away by investing in both Industrivarden and Creades AB 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 Creades AB 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 Creades AB, you can compare the effects of market volatilities on Industrivarden and Creades AB 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 Creades AB. Check out your portfolio center. Please also check ongoing floating volatility patterns of Industrivarden and Creades AB.

Diversification Opportunities for Industrivarden and Creades AB

0.64

Correlation Coefficient

Industrivarden  Creades AB

Poor diversification

The 3 months correlation between Industrivarden and Creades is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Industrivarden AB ser and Creades AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Creades AB 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 Creades AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Creades AB has no effect on the direction of Industrivarden i.e., Industrivarden and Creades AB go up and down completely randomly.

Pair Corralation between Industrivarden and Creades AB

Assuming the 90 days trading horizon Industrivarden AB ser is expected to under-perform the Creades AB. But the stock apears to be less risky and, when comparing its historical volatility, Industrivarden AB ser is 1.7 times less risky than Creades AB. The stock trades about -0.09 of its potential returns per unit of risk. The Creades AB is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  7,150  in Creades AB on September 1, 2024 and sell it today you would lose (105.00) from holding Creades AB or give up 1.47% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.65%
Values	Daily Returns

Industrivarden AB ser  vs.  Creades AB

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 somewhat strong fundamental indicators, Industrivarden is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Creades AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Creades AB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong technical and fundamental indicators, Creades AB is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Industrivarden and Creades AB

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

The idea behind Industrivarden AB ser and Creades 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.