Correlation Between Industrivarden and EQT AB

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

Diversification Opportunities for Industrivarden and EQT AB

0.3

Correlation Coefficient

Industrivarden  EQT AB

Weak diversification

The 3 months correlation between Industrivarden and EQT is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Industrivarden AB ser and EQT AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EQT 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 EQT AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EQT AB has no effect on the direction of Industrivarden i.e., Industrivarden and EQT AB go up and down completely randomly.

Pair Corralation between Industrivarden and EQT AB

Assuming the 90 days trading horizon Industrivarden AB ser is expected to generate 0.54 times more return on investment than EQT AB. However, Industrivarden AB ser is 1.86 times less risky than EQT AB. It trades about -0.04 of its potential returns per unit of risk. EQT AB is currently generating about -0.05 per unit of risk. If you would invest  36,730  in Industrivarden AB ser on August 31, 2024 and sell it today you would lose (960.00) from holding Industrivarden AB ser or give up 2.61% 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.  EQT 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.

EQT AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days EQT AB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, EQT AB is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Industrivarden and EQT AB

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

The idea behind Industrivarden AB ser and EQT 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.