Correlation Between Industrivarden and DistIT AB

Can any of the company-specific risk be diversified away by investing in both Industrivarden and DistIT AB 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 Industrivarden and DistIT AB into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Industrivarden AB ser and DistIT AB, you can compare the effects of market volatilities on Industrivarden and DistIT AB 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 Industrivarden with a short position of DistIT AB. Check out your portfolio center. Please also check ongoing floating volatility patterns of Industrivarden and DistIT AB.

Diversification Opportunities for Industrivarden and DistIT AB

-0.94

Correlation Coefficient

Industrivarden  DistIT AB

Pay attention - limited upside

The 3 months correlation between Industrivarden and DistIT is -0.94. Overlapping area represents the amount of risk that can be diversified away by holding Industrivarden AB ser and DistIT AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DistIT AB and Industrivarden 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 Industrivarden AB ser are associated (or correlated) with DistIT AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DistIT AB has no effect on the direction of Industrivarden i.e., Industrivarden and DistIT AB go up and down completely randomly.

Pair Corralation between Industrivarden and DistIT AB

Assuming the 90 days trading horizon Industrivarden AB ser is expected to under-perform the DistIT AB. But the stock apears to be less risky and, when comparing its historical volatility, Industrivarden AB ser is 4.08 times less risky than DistIT AB. The stock trades about -0.07 of its potential returns per unit of risk. The DistIT AB is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  419.00  in DistIT AB on February 4, 2024 and sell it today you would earn a total of  9.00  from holding DistIT AB or generate 2.15% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Industrivarden AB ser  vs.  DistIT AB

Industrivarden AB ser

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Industrivarden AB ser are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Industrivarden may actually be approaching a critical reversion point that can send shares even higher in June 2024.

DistIT AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DistIT AB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in June 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Industrivarden and DistIT AB

The main advantage of trading using opposite Industrivarden and DistIT AB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Industrivarden position performs unexpectedly, DistIT AB 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 DistIT AB will offset losses from the drop in DistIT AB's long position.

The idea behind Industrivarden AB ser and DistIT 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.

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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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.