Correlation Between Avanza Bank and Inwido AB

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

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

Diversification Opportunities for Avanza Bank and Inwido AB

0.03

Correlation Coefficient

Avanza Bank  Inwido AB

Significant diversification

The 3 months correlation between Avanza and Inwido is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Avanza Bank Holding and Inwido AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inwido AB and Avanza Bank 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 Avanza Bank Holding are associated (or correlated) with Inwido AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Inwido AB has no effect on the direction of Avanza Bank i.e., Avanza Bank and Inwido AB go up and down completely randomly.

Pair Corralation between Avanza Bank and Inwido AB

Assuming the 90 days trading horizon Avanza Bank Holding is expected to generate 1.0 times more return on investment than Inwido AB. However, Avanza Bank Holding is 1.0 times less risky than Inwido AB. It trades about 0.1 of its potential returns per unit of risk. Inwido AB is currently generating about 0.06 per unit of risk. If you would invest  23,860  in Avanza Bank Holding on September 13, 2024 and sell it today you would earn a total of  2,690  from holding Avanza Bank Holding or generate 11.27% return on investment over 90 days.

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

Avanza Bank Holding  vs.  Inwido AB

Avanza Bank Holding

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Avanza Bank Holding are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Avanza Bank may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Inwido AB

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Inwido AB are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Inwido AB may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Avanza Bank and Inwido AB

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

The idea behind Avanza Bank Holding and Inwido 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.

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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.