Correlation Between Probi AB and I Tech
Can any of the company-specific risk be diversified away by investing in both Probi AB and I Tech 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 Probi AB and I Tech into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Probi AB and I Tech, you can compare the effects of market volatilities on Probi AB and I Tech 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 Probi AB with a short position of I Tech. Check out your portfolio center. Please also check ongoing floating volatility patterns of Probi AB and I Tech.
Diversification Opportunities for Probi AB and I Tech
Good diversification
The 3 months correlation between Probi and ITECH is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Probi AB and I Tech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on I Tech and Probi AB 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 Probi AB are associated (or correlated) with I Tech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of I Tech has no effect on the direction of Probi AB i.e., Probi AB and I Tech go up and down completely randomly.
Pair Corralation between Probi AB and I Tech
Assuming the 90 days trading horizon Probi AB is expected to generate 3.75 times more return on investment than I Tech. However, Probi AB is 3.75 times more volatile than I Tech. It trades about 0.14 of its potential returns per unit of risk. I Tech is currently generating about 0.11 per unit of risk. If you would invest 27,900 in Probi AB on September 1, 2024 and sell it today you would earn a total of 6,800 from holding Probi AB or generate 24.37% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Probi AB vs. I Tech
Performance |
| Timeline |
| Probi AB |
| I Tech |
Probi AB and I Tech Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Probi AB and I Tech
The main advantage of trading using opposite Probi AB and I Tech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Probi AB position performs unexpectedly, I Tech 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 I Tech will offset losses from the drop in I Tech's long position.The idea behind Probi AB and I Tech 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.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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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