Correlation Between Investor and Sleep Cycle
Can any of the company-specific risk be diversified away by investing in both Investor and Sleep Cycle 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 Sleep Cycle 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 Sleep Cycle AB, you can compare the effects of market volatilities on Investor and Sleep Cycle 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 Sleep Cycle. Check out your portfolio center. Please also check ongoing floating volatility patterns of Investor and Sleep Cycle.
Diversification Opportunities for Investor and Sleep Cycle
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Investor and Sleep is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Investor AB ser and Sleep Cycle AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sleep Cycle AB 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 Sleep Cycle. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sleep Cycle AB has no effect on the direction of Investor i.e., Investor and Sleep Cycle go up and down completely randomly.
Pair Corralation between Investor and Sleep Cycle
Assuming the 90 days trading horizon Investor AB ser is expected to generate 0.54 times more return on investment than Sleep Cycle. However, Investor AB ser is 1.87 times less risky than Sleep Cycle. It trades about -0.15 of its potential returns per unit of risk. Sleep Cycle AB is currently generating about -0.48 per unit of risk. If you would invest 29,690 in Investor AB ser on September 24, 2024 and sell it today you would lose (710.00) from holding Investor AB ser or give up 2.39% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Investor AB ser vs. Sleep Cycle AB
Performance |
| Timeline |
| Investor AB ser |
| Sleep Cycle AB |
Investor and Sleep Cycle Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Investor and Sleep Cycle
The main advantage of trading using opposite Investor and Sleep Cycle positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Investor position performs unexpectedly, Sleep Cycle 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 Sleep Cycle will offset losses from the drop in Sleep Cycle's long position.| Investor vs. Kinnevik Investment AB | Investor vs. Samhllsbyggnadsbolaget i Norden | Investor vs. Swedbank AB |
| Sleep Cycle vs. Humble Group AB | Sleep Cycle vs. Enad Global 7 | Sleep Cycle vs. Goodbye Kansas Group | Sleep Cycle vs. Mekonomen AB |
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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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