Correlation Between Smart Eye and Profoto Holding

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

Diversification Opportunities for Smart Eye and Profoto Holding

0.76

Correlation Coefficient

Smart Eye  Profoto Holding

Poor diversification

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

Pair Corralation between Smart Eye and Profoto Holding

Assuming the 90 days trading horizon Smart Eye AB is expected to generate 1.0 times more return on investment than Profoto Holding. However, Smart Eye AB is 1.0 times less risky than Profoto Holding. It trades about -0.03 of its potential returns per unit of risk. Profoto Holding AB is currently generating about -0.3 per unit of risk. If you would invest  6,460  in Smart Eye AB on September 1, 2024 and sell it today you would lose (210.00) from holding Smart Eye AB or give up 3.25% of portfolio value over 90 days.

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

Smart Eye AB  vs.  Profoto Holding 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 weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in December 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

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 uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in December 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Smart Eye and Profoto Holding

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

The idea behind Smart Eye AB and Profoto Holding 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.