Correlation Between Investor and Idun Industrier

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

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

Diversification Opportunities for Investor and Idun Industrier

-0.63

Correlation Coefficient

Investor  Idun Industrier

Excellent diversification

The 3 months correlation between Investor and Idun is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Investor AB ser and Idun Industrier AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Idun Industrier AB and Investor 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 Investor AB ser are associated (or correlated) with Idun Industrier. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Idun Industrier AB has no effect on the direction of Investor i.e., Investor and Idun Industrier go up and down completely randomly.

Pair Corralation between Investor and Idun Industrier

Assuming the 90 days trading horizon Investor AB ser is expected to under-perform the Idun Industrier. But the stock apears to be less risky and, when comparing its historical volatility, Investor AB ser is 2.56 times less risky than Idun Industrier. The stock trades about -0.02 of its potential returns per unit of risk. The Idun Industrier AB is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  25,900  in Idun Industrier AB on September 3, 2024 and sell it today you would earn a total of  1,500  from holding Idun Industrier AB or generate 5.79% return on investment over 90 days.

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

Investor AB ser  vs.  Idun Industrier AB

Investor AB ser

Risk-Adjusted Performance

0 of 100

Very Weak

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

Idun Industrier AB

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Idun Industrier AB are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Idun Industrier may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Investor and Idun Industrier

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

The idea behind Investor AB ser and Idun Industrier 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.