Correlation Between Proact IT and Indutrade
Can any of the company-specific risk be diversified away by investing in both Proact IT and Indutrade 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 Proact IT and Indutrade into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Proact IT Group and Indutrade AB, you can compare the effects of market volatilities on Proact IT and Indutrade 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 Proact IT with a short position of Indutrade. Check out your portfolio center. Please also check ongoing floating volatility patterns of Proact IT and Indutrade.
Diversification Opportunities for Proact IT and Indutrade
Average diversification
The 3 months correlation between Proact and Indutrade is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Proact IT Group and Indutrade AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Indutrade AB and Proact IT 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 Proact IT Group are associated (or correlated) with Indutrade. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Indutrade AB has no effect on the direction of Proact IT i.e., Proact IT and Indutrade go up and down completely randomly.
Pair Corralation between Proact IT and Indutrade
Assuming the 90 days trading horizon Proact IT Group is expected to under-perform the Indutrade. In addition to that, Proact IT is 1.73 times more volatile than Indutrade AB. It trades about -0.06 of its total potential returns per unit of risk. Indutrade AB is currently generating about 0.07 per unit of volatility. If you would invest 28,960 in Indutrade AB on December 6, 2024 and sell it today you would earn a total of 1,760 from holding Indutrade AB or generate 6.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Proact IT Group vs. Indutrade AB
Performance |
| Timeline |
| Proact IT Group |
| Indutrade AB |
Proact IT and Indutrade Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Proact IT and Indutrade
The main advantage of trading using opposite Proact IT and Indutrade positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Proact IT position performs unexpectedly, Indutrade 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 Indutrade will offset losses from the drop in Indutrade's long position.The idea behind Proact IT Group and Indutrade AB pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Indutrade vs. Lifco 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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