Correlation Between Investor and Vef AB
Can any of the company-specific risk be diversified away by investing in both Investor and Vef 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 Investor and Vef AB 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 Vef AB, you can compare the effects of market volatilities on Investor and Vef 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 Investor with a short position of Vef AB. Check out your portfolio center. Please also check ongoing floating volatility patterns of Investor and Vef AB.
Diversification Opportunities for Investor and Vef AB
Poor diversification
The 3 months correlation between Investor and Vef is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Investor AB ser and Vef AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vef 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 Vef AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vef AB has no effect on the direction of Investor i.e., Investor and Vef AB go up and down completely randomly.
Pair Corralation between Investor and Vef AB
Assuming the 90 days trading horizon Investor AB ser is expected to generate 0.43 times more return on investment than Vef AB. However, Investor AB ser is 2.32 times less risky than Vef AB. It trades about 0.04 of its potential returns per unit of risk. Vef AB is currently generating about -0.07 per unit of risk. If you would invest 28,468 in Investor AB ser on September 3, 2024 and sell it today you would earn a total of 1,262 from holding Investor AB ser or generate 4.43% 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. Vef AB
Performance |
| Timeline |
| Investor AB ser |
| Vef AB |
Investor and Vef AB Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Investor and Vef AB
The main advantage of trading using opposite Investor and Vef AB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Investor position performs unexpectedly, Vef 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 Vef AB will offset losses from the drop in Vef AB's long position.| Investor vs. Investor AB ser | Investor vs. Industrivarden AB ser | Investor vs. Investment AB Latour | Investor vs. Kinnevik Investment AB |
| Vef AB vs. L E Lundbergfretagen | Vef AB vs. Industrivarden AB ser | Vef AB vs. Svenska Handelsbanken AB | Vef AB vs. Investment AB Latour |
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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