Correlation Between Inwido AB and Indutrade

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

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

Diversification Opportunities for Inwido AB and Indutrade

0.91

Correlation Coefficient

Inwido AB  Indutrade

Almost no diversification

The 3 months correlation between Inwido and Indutrade is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Inwido AB and Indutrade AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Indutrade 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 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 Inwido AB i.e., Inwido AB and Indutrade go up and down completely randomly.

Pair Corralation between Inwido AB and Indutrade

Assuming the 90 days trading horizon Inwido AB is expected to generate 1.09 times less return on investment than Indutrade. In addition to that, Inwido AB is 1.02 times more volatile than Indutrade AB. It trades about 0.14 of its total potential returns per unit of risk. Indutrade AB is currently generating about 0.15 per unit of volatility. If you would invest  27,580  in Indutrade AB on November 28, 2024 and sell it today you would earn a total of  3,740  from holding Indutrade AB or generate 13.56% return on investment over 90 days.

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

Inwido AB  vs.  Indutrade AB

Inwido AB

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Inwido AB are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Inwido AB unveiled solid returns over the last few months and may actually be approaching a breakup point.

Indutrade AB

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Indutrade AB are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Indutrade unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Inwido AB and Indutrade

The main advantage of trading using opposite Inwido AB and Indutrade positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Inwido AB 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 Inwido 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.