Correlation Between Investment and Svolder AB

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

Diversification Opportunities for Investment and Svolder AB

0.73

Correlation Coefficient

Investment  Svolder AB

Poor diversification

The 3 months correlation between Investment and Svolder is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Investment AB Latour and Svolder AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Svolder AB 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 Svolder AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Svolder AB has no effect on the direction of Investment i.e., Investment and Svolder AB go up and down completely randomly.

Pair Corralation between Investment and Svolder AB

Assuming the 90 days trading horizon Investment AB Latour is expected to generate 0.59 times more return on investment than Svolder AB. However, Investment AB Latour is 1.69 times less risky than Svolder AB. It trades about -0.07 of its potential returns per unit of risk. Svolder AB is currently generating about -0.1 per unit of risk. If you would invest  30,080  in Investment AB Latour on October 10, 2024 and sell it today you would lose (1,850) from holding Investment AB Latour or give up 6.15% of portfolio value over 90 days.

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

Investment AB Latour  vs.  Svolder AB

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 somewhat strong basic indicators, Investment is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Svolder AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Svolder AB 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 February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Investment and Svolder AB

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

The idea behind Investment AB Latour and Svolder 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.