Correlation Between Inwido AB and Diadrom Holding

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

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

Diversification Opportunities for Inwido AB and Diadrom Holding

0.42

Correlation Coefficient

Inwido AB  Diadrom Holding

Very weak diversification

The 3 months correlation between Inwido and Diadrom is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Inwido AB and Diadrom Holding AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Diadrom Holding AB and Inwido AB 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 Inwido AB are associated (or correlated) with Diadrom Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Diadrom Holding AB has no effect on the direction of Inwido AB i.e., Inwido AB and Diadrom Holding go up and down completely randomly.

Pair Corralation between Inwido AB and Diadrom Holding

Assuming the 90 days trading horizon Inwido AB is expected to generate 1.51 times less return on investment than Diadrom Holding. But when comparing it to its historical volatility, Inwido AB is 2.17 times less risky than Diadrom Holding. It trades about 0.15 of its potential returns per unit of risk. Diadrom Holding AB is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  694.00  in Diadrom Holding AB on December 23, 2024 and sell it today you would earn a total of  136.00  from holding Diadrom Holding AB or generate 19.6% return on investment over 90 days.

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

Inwido AB  vs.  Diadrom Holding AB

Inwido AB

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Inwido AB are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Inwido AB unveiled solid returns over the last few months and may actually be approaching a breakup point.

Diadrom Holding AB

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Diadrom Holding AB are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Diadrom Holding unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Inwido AB and Diadrom Holding

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

The idea behind Inwido AB and Diadrom Holding 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.