Correlation Between Profoto Holding and Smart Eye

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

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

Diversification Opportunities for Profoto Holding and Smart Eye

0.76

Correlation Coefficient

Profoto Holding  Smart Eye

Poor diversification

The 3 months correlation between Profoto and Smart is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Profoto Holding AB and Smart Eye AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Smart Eye AB and Profoto Holding 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 Profoto Holding AB are associated (or correlated) with Smart Eye. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Smart Eye AB has no effect on the direction of Profoto Holding i.e., Profoto Holding and Smart Eye go up and down completely randomly.

Pair Corralation between Profoto Holding and Smart Eye

Assuming the 90 days trading horizon Profoto Holding AB is expected to under-perform the Smart Eye. But the stock apears to be less risky and, when comparing its historical volatility, Profoto Holding AB is 1.31 times less risky than Smart Eye. The stock trades about -0.03 of its potential returns per unit of risk. The Smart Eye AB is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  3,449  in Smart Eye AB on September 3, 2024 and sell it today you would earn a total of  2,801  from holding Smart Eye AB or generate 81.21% return on investment over 90 days.

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

Profoto Holding AB  vs.  Smart Eye AB

Profoto Holding AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Profoto Holding AB 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.

Smart Eye AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Smart Eye AB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain 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 Profoto Holding and Smart Eye

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

The idea behind Profoto Holding AB and Smart Eye 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.