Correlation Between Investment and NOTE AB

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

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

Diversification Opportunities for Investment and NOTE AB

0.4

Correlation Coefficient

Investment  NOTE AB

Very weak diversification

The 3 months correlation between Investment and NOTE is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Investment AB Oresund and NOTE AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NOTE 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 Oresund are associated (or correlated) with NOTE AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NOTE AB has no effect on the direction of Investment i.e., Investment and NOTE AB go up and down completely randomly.

Pair Corralation between Investment and NOTE AB

Assuming the 90 days trading horizon Investment is expected to generate 12.15 times less return on investment than NOTE AB. But when comparing it to its historical volatility, Investment AB Oresund is 1.38 times less risky than NOTE AB. It trades about 0.02 of its potential returns per unit of risk. NOTE AB is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  13,340  in NOTE AB on December 2, 2024 and sell it today you would earn a total of  2,130  from holding NOTE AB or generate 15.97% return on investment over 90 days.

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

Investment AB Oresund  vs.  NOTE AB

Investment AB Oresund

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Investment AB Oresund are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Investment is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

NOTE AB

Risk-Adjusted Performance

OK

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

Pair Trading with Investment and NOTE AB

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

The idea behind Investment AB Oresund and NOTE 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.