Correlation Between IRLAB Therapeutics and Essity AB

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

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

Diversification Opportunities for IRLAB Therapeutics and Essity AB

0.7

Correlation Coefficient

IRLAB Therapeutics  Essity AB

Poor diversification

The 3 months correlation between IRLAB and Essity is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding IRLAB Therapeutics AB and Essity AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Essity AB and IRLAB Therapeutics 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 IRLAB Therapeutics AB are associated (or correlated) with Essity AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Essity AB has no effect on the direction of IRLAB Therapeutics i.e., IRLAB Therapeutics and Essity AB go up and down completely randomly.

Pair Corralation between IRLAB Therapeutics and Essity AB

Assuming the 90 days trading horizon IRLAB Therapeutics AB is expected to under-perform the Essity AB. In addition to that, IRLAB Therapeutics is 4.65 times more volatile than Essity AB. It trades about -0.16 of its total potential returns per unit of risk. Essity AB is currently generating about -0.2 per unit of volatility. If you would invest  28,800  in Essity AB on April 21, 2025 and sell it today you would lose (4,240) from holding Essity AB or give up 14.72% of portfolio value over 90 days.

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

IRLAB Therapeutics AB  vs.  Essity AB

IRLAB Therapeutics

Risk-Adjusted Performance

Very Weak

Over the last 90 days IRLAB Therapeutics AB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in August 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Essity AB

Risk-Adjusted Performance

Very Weak

Over the last 90 days Essity AB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in August 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with IRLAB Therapeutics and Essity AB

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

The idea behind IRLAB Therapeutics AB and Essity 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.