Correlation Between Investor and Industrivarden

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

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

Diversification Opportunities for Investor and Industrivarden

0.76

Correlation Coefficient

Investor  Industrivarden

Poor diversification

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

Pair Corralation between Investor and Industrivarden

Assuming the 90 days trading horizon Investor AB ser is expected to generate 0.95 times more return on investment than Industrivarden. However, Investor AB ser is 1.05 times less risky than Industrivarden. It trades about 0.1 of its potential returns per unit of risk. Industrivarden AB ser is currently generating about 0.09 per unit of risk. If you would invest  16,063  in Investor AB ser on March 10, 2024 and sell it today you would earn a total of  12,817  from holding Investor AB ser or generate 79.79% return on investment over 90 days.

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

Investor AB ser  vs.  Industrivarden AB ser

Investor AB ser

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Investor AB ser are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Investor may actually be approaching a critical reversion point that can send shares even higher in July 2024.

Industrivarden AB ser

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Industrivarden AB ser are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Industrivarden is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Investor and Industrivarden

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

The idea behind Investor AB ser and Industrivarden AB ser 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.