Correlation Between Invisio Communications and Leading Edge
Can any of the company-specific risk be diversified away by investing in both Invisio Communications and Leading Edge 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 Invisio Communications and Leading Edge into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Invisio Communications AB and Leading Edge Materials, you can compare the effects of market volatilities on Invisio Communications and Leading Edge 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 Invisio Communications with a short position of Leading Edge. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invisio Communications and Leading Edge.
Diversification Opportunities for Invisio Communications and Leading Edge
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Invisio and Leading is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Invisio Communications AB and Leading Edge Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Leading Edge Materials and Invisio Communications 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 Invisio Communications AB are associated (or correlated) with Leading Edge. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Leading Edge Materials has no effect on the direction of Invisio Communications i.e., Invisio Communications and Leading Edge go up and down completely randomly.
Pair Corralation between Invisio Communications and Leading Edge
Assuming the 90 days trading horizon Invisio Communications is expected to generate 1.14 times less return on investment than Leading Edge. But when comparing it to its historical volatility, Invisio Communications AB is 2.09 times less risky than Leading Edge. It trades about 0.12 of its potential returns per unit of risk. Leading Edge Materials is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 85.00 in Leading Edge Materials on December 5, 2024 and sell it today you would earn a total of 59.00 from holding Leading Edge Materials or generate 69.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Invisio Communications AB vs. Leading Edge Materials
Performance |
| Timeline |
| Invisio Communications |
| Leading Edge Materials |
Invisio Communications and Leading Edge Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Invisio Communications and Leading Edge
The main advantage of trading using opposite Invisio Communications and Leading Edge positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Invisio Communications position performs unexpectedly, Leading Edge 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 Leading Edge will offset losses from the drop in Leading Edge's long position.| Invisio Communications vs. Hexatronic Group AB | ||
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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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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