Correlation Between Leading Edge and Invisio Communications
Can any of the company-specific risk be diversified away by investing in both Leading Edge and Invisio Communications 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 Leading Edge and Invisio Communications into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Leading Edge Materials and Invisio Communications AB, you can compare the effects of market volatilities on Leading Edge and Invisio Communications 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 Leading Edge with a short position of Invisio Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of Leading Edge and Invisio Communications.
Diversification Opportunities for Leading Edge and Invisio Communications
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Leading and Invisio is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Leading Edge Materials and Invisio Communications AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invisio Communications and Leading Edge 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 Leading Edge Materials are associated (or correlated) with Invisio Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invisio Communications has no effect on the direction of Leading Edge i.e., Leading Edge and Invisio Communications go up and down completely randomly.
Pair Corralation between Leading Edge and Invisio Communications
Assuming the 90 days trading horizon Leading Edge Materials is expected to generate 2.09 times more return on investment than Invisio Communications. However, Leading Edge is 2.09 times more volatile than Invisio Communications AB. It trades about 0.07 of its potential returns per unit of risk. Invisio Communications AB is currently generating about 0.12 per unit of risk. 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 |
Leading Edge Materials vs. Invisio Communications AB
Performance |
| Timeline |
| Leading Edge Materials |
| Invisio Communications |
Leading Edge and Invisio Communications Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Leading Edge and Invisio Communications
The main advantage of trading using opposite Leading Edge and Invisio Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Leading Edge position performs unexpectedly, Invisio Communications 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 Invisio Communications will offset losses from the drop in Invisio Communications' long position.| Leading Edge vs. TradeDoubler 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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