Correlation Between Investor and Storskogen Group

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

Diversification Opportunities for Investor and Storskogen Group

-0.32

Correlation Coefficient

Investor  Storskogen Group

Very good diversification

The 3 months correlation between Investor and Storskogen is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Investor AB ser and Storskogen Group AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Storskogen Group 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 Storskogen Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Storskogen Group has no effect on the direction of Investor i.e., Investor and Storskogen Group go up and down completely randomly.

Pair Corralation between Investor and Storskogen Group

Assuming the 90 days trading horizon Investor is expected to generate 4.56 times less return on investment than Storskogen Group. But when comparing it to its historical volatility, Investor AB ser is 3.92 times less risky than Storskogen Group. It trades about 0.09 of its potential returns per unit of risk. Storskogen Group AB is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  995.00  in Storskogen Group AB on September 5, 2024 and sell it today you would earn a total of  193.00  from holding Storskogen Group AB or generate 19.4% return on investment over 90 days.

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

Investor AB ser  vs.  Storskogen Group AB

Investor AB ser

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Investor AB ser are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. 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.

Storskogen Group

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Storskogen Group AB are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Storskogen Group sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Investor and Storskogen Group

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

The idea behind Investor AB ser and Storskogen Group 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.