Correlation Between Smart Eye and Prevas AB

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

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

Diversification Opportunities for Smart Eye and Prevas AB

0.76

Correlation Coefficient

Smart Eye  Prevas AB

Poor diversification

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

Pair Corralation between Smart Eye and Prevas AB

Assuming the 90 days trading horizon Smart Eye AB is expected to under-perform the Prevas AB. In addition to that, Smart Eye is 1.07 times more volatile than Prevas AB. It trades about -0.01 of its total potential returns per unit of risk. Prevas AB is currently generating about 0.16 per unit of volatility. If you would invest  10,700  in Prevas AB on September 27, 2024 and sell it today you would earn a total of  640.00  from holding Prevas AB or generate 5.98% return on investment over 90 days.

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

Smart Eye AB  vs.  Prevas AB

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 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.

Prevas AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Prevas AB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Smart Eye and Prevas AB

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

The idea behind Smart Eye AB and Prevas 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.