Correlation Between Inission and Indutrade

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

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

Diversification Opportunities for Inission and Indutrade

0.58

Correlation Coefficient

Inission  Indutrade

Very weak diversification

The 3 months correlation between Inission and Indutrade is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Inission AB and Indutrade AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Indutrade AB and Inission 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 Inission AB are associated (or correlated) with Indutrade. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Indutrade AB has no effect on the direction of Inission i.e., Inission and Indutrade go up and down completely randomly.

Pair Corralation between Inission and Indutrade

Assuming the 90 days trading horizon Inission AB is expected to generate 1.54 times more return on investment than Indutrade. However, Inission is 1.54 times more volatile than Indutrade AB. It trades about 0.0 of its potential returns per unit of risk. Indutrade AB is currently generating about -0.07 per unit of risk. If you would invest  3,670  in Inission AB on October 11, 2024 and sell it today you would lose (30.00) from holding Inission AB or give up 0.82% of portfolio value over 90 days.

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

Inission AB  vs.  Indutrade AB

Inission AB

Risk-Adjusted Performance

0 of 100

Very Weak

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

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. In spite of latest weak performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Inission and Indutrade

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

The idea behind Inission AB and Indutrade 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.