Correlation Between Snap and NIBE Industrier
Can any of the company-specific risk be diversified away by investing in both Snap and NIBE Industrier 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 Snap and NIBE Industrier into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Snap Inc and NIBE Industrier AB, you can compare the effects of market volatilities on Snap and NIBE Industrier 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 Snap with a short position of NIBE Industrier. Check out your portfolio center. Please also check ongoing floating volatility patterns of Snap and NIBE Industrier.
Diversification Opportunities for Snap and NIBE Industrier
0.05 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Snap and NIBE is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Snap Inc and NIBE Industrier AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NIBE Industrier AB and Snap 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 Snap Inc are associated (or correlated) with NIBE Industrier. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NIBE Industrier AB has no effect on the direction of Snap i.e., Snap and NIBE Industrier go up and down completely randomly.
Pair Corralation between Snap and NIBE Industrier
Given the investment horizon of 90 days Snap Inc is expected to generate 1.8 times more return on investment than NIBE Industrier. However, Snap is 1.8 times more volatile than NIBE Industrier AB. It trades about 0.1 of its potential returns per unit of risk. NIBE Industrier AB is currently generating about -0.2 per unit of risk. If you would invest 1,071 in Snap Inc on August 27, 2024 and sell it today you would earn a total of 89.00 from holding Snap Inc or generate 8.31% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Snap Inc vs. NIBE Industrier AB
Performance |
| Timeline |
| Snap Inc |
| NIBE Industrier AB |
Snap and NIBE Industrier Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Snap and NIBE Industrier
The main advantage of trading using opposite Snap and NIBE Industrier positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Snap position performs unexpectedly, NIBE Industrier 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 NIBE Industrier will offset losses from the drop in NIBE Industrier's long position.The idea behind Snap Inc and NIBE Industrier 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.| NIBE Industrier vs. Trane Technologies plc | NIBE Industrier vs. Carrier Global Corp | NIBE Industrier vs. Johnson Controls International | NIBE Industrier vs. Lennox International |
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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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