Correlation Between IT Link and Bredband2
Can any of the company-specific risk be diversified away by investing in both IT Link and Bredband2 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 IT Link and Bredband2 into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between IT Link and Bredband2 i Skandinavien, you can compare the effects of market volatilities on IT Link and Bredband2 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 IT Link with a short position of Bredband2. Check out your portfolio center. Please also check ongoing floating volatility patterns of IT Link and Bredband2.
Diversification Opportunities for IT Link and Bredband2
Very good diversification
The 3 months correlation between ALITL and Bredband2 is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding IT Link and Bredband2 i Skandinavien in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bredband2 i Skandinavien and IT Link 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 IT Link are associated (or correlated) with Bredband2. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bredband2 i Skandinavien has no effect on the direction of IT Link i.e., IT Link and Bredband2 go up and down completely randomly.
Pair Corralation between IT Link and Bredband2
Assuming the 90 days trading horizon IT Link is expected to generate 1.08 times more return on investment than Bredband2. However, IT Link is 1.08 times more volatile than Bredband2 i Skandinavien. It trades about 0.14 of its potential returns per unit of risk. Bredband2 i Skandinavien is currently generating about 0.02 per unit of risk. If you would invest 2,570 in IT Link on September 1, 2024 and sell it today you would earn a total of 100.00 from holding IT Link or generate 3.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
IT Link vs. Bredband2 i Skandinavien
Performance |
| Timeline |
| IT Link |
| Bredband2 i Skandinavien |
IT Link and Bredband2 Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IT Link and Bredband2
The main advantage of trading using opposite IT Link and Bredband2 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IT Link position performs unexpectedly, Bredband2 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 Bredband2 will offset losses from the drop in Bredband2's long position.The idea behind IT Link and Bredband2 i Skandinavien 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.Check out your portfolio center.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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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