Correlation Between Investor and Investment
Can any of the company-specific risk be diversified away by investing in both Investor and Investment 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 Investment 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 Investment AB Latour, you can compare the effects of market volatilities on Investor and Investment 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 Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Investor and Investment.
Diversification Opportunities for Investor and Investment
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Investor and Investment is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Investor AB ser and Investment AB Latour in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Investment AB Latour 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 Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Investment AB Latour has no effect on the direction of Investor i.e., Investor and Investment go up and down completely randomly.
Pair Corralation between Investor and Investment
Assuming the 90 days trading horizon Investor AB ser is expected to generate 0.64 times more return on investment than Investment. However, Investor AB ser is 1.56 times less risky than Investment. It trades about 0.1 of its potential returns per unit of risk. Investment AB Latour is currently generating about 0.04 per unit of risk. If you would invest 19,543 in Investor AB ser on October 21, 2024 and sell it today you would earn a total of 11,747 from holding Investor AB ser or generate 60.11% 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. Investment AB Latour
Performance |
| Timeline |
| Investor AB ser |
| Investment AB Latour |
Investor and Investment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Investor and Investment
The main advantage of trading using opposite Investor and Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Investor position performs unexpectedly, Investment 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 Investment will offset losses from the drop in Investment's long position.| Investor vs. Kinnevik Investment AB | Investor vs. Investment AB Latour | Investor vs. Samhllsbyggnadsbolaget i Norden | Investor vs. Industrivarden AB ser |
| Investment vs. Kinnevik Investment AB | Investment vs. Investor AB ser | Investment vs. L E Lundbergfretagen | Investment vs. Industrivarden AB ser |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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