Correlation Between Investment and Investment

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

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

Diversification Opportunities for Investment and Investment

0.86

Correlation Coefficient

Investment  Investment

Very poor diversification

The 3 months correlation between Investment and Investment is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Investment AB Latour and Investment AB Oresund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Investment AB Oresund and Investment 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 Investment AB Latour are associated (or correlated) with Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Investment AB Oresund has no effect on the direction of Investment i.e., Investment and Investment go up and down completely randomly.

Pair Corralation between Investment and Investment

Assuming the 90 days trading horizon Investment AB Latour is expected to generate 1.13 times more return on investment than Investment. However, Investment is 1.13 times more volatile than Investment AB Oresund. It trades about 0.05 of its potential returns per unit of risk. Investment AB Oresund is currently generating about 0.02 per unit of risk. If you would invest  19,482  in Investment AB Latour on September 26, 2024 and sell it today you would earn a total of  8,088  from holding Investment AB Latour or generate 41.52% return on investment over 90 days.

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

Investment AB Latour  vs.  Investment AB Oresund

Investment AB Latour

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Investment AB Latour has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Investment AB Oresund

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Investment AB Oresund has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Investment and Investment

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

The idea behind Investment AB Latour and Investment AB Oresund 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..