Correlation Between SBB-B and Indutrade

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

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

Diversification Opportunities for SBB-B and Indutrade

0.86

Correlation Coefficient

SBB-B  Indutrade

Very poor diversification

The 3 months correlation between SBB-B and Indutrade is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Samhllsbyggnadsbolaget i Norde and Indutrade AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Indutrade AB and SBB-B 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 Samhllsbyggnadsbolaget i Norden 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 SBB-B i.e., SBB-B and Indutrade go up and down completely randomly.

Pair Corralation between SBB-B and Indutrade

Assuming the 90 days trading horizon Samhllsbyggnadsbolaget i Norden is expected to under-perform the Indutrade. In addition to that, SBB-B is 3.12 times more volatile than Indutrade AB. It trades about -0.15 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  31,820  in Indutrade AB on September 3, 2024 and sell it today you would lose (3,980) from holding Indutrade AB or give up 12.51% of portfolio value over 90 days.

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

Samhllsbyggnadsbolaget i Norde  vs.  Indutrade AB

Samhllsbyggnadsbolaget

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Samhllsbyggnadsbolaget i Norden 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.

Indutrade AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Indutrade AB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with SBB-B and Indutrade

The main advantage of trading using opposite SBB-B and Indutrade positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SBB-B 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 Samhllsbyggnadsbolaget i Norden 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.