Correlation Between Industrivarden and TF Bank

Can any of the company-specific risk be diversified away by investing in both Industrivarden and TF Bank 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 TF Bank 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 TF Bank AB, you can compare the effects of market volatilities on Industrivarden and TF Bank 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 TF Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Industrivarden and TF Bank.

Diversification Opportunities for Industrivarden and TF Bank

0.05

Correlation Coefficient

Industrivarden  TF Bank

Significant diversification

The 3 months correlation between Industrivarden and TFBANK is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Industrivarden AB ser and TF Bank AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TF Bank 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 TF Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TF Bank AB has no effect on the direction of Industrivarden i.e., Industrivarden and TF Bank go up and down completely randomly.

Pair Corralation between Industrivarden and TF Bank

Assuming the 90 days trading horizon Industrivarden is expected to generate 7.75 times less return on investment than TF Bank. But when comparing it to its historical volatility, Industrivarden AB ser is 2.25 times less risky than TF Bank. It trades about 0.07 of its potential returns per unit of risk. TF Bank AB is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  26,400  in TF Bank AB on September 5, 2024 and sell it today you would earn a total of  9,400  from holding TF Bank AB or generate 35.61% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

Industrivarden AB ser  vs.  TF Bank AB

Industrivarden AB ser

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Industrivarden AB ser are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental indicators, Industrivarden is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

TF Bank AB

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in TF Bank AB are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental drivers, TF Bank sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Industrivarden and TF Bank

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

The idea behind Industrivarden AB ser and TF Bank 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..