Correlation Between Investment and Smart Eye

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

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

Diversification Opportunities for Investment and Smart Eye

0.57

Correlation Coefficient

Investment  Smart Eye

Very weak diversification

The 3 months correlation between Investment and Smart is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Investment AB Oresund and Smart Eye AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Smart Eye AB and Investment 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 Investment AB Oresund are associated (or correlated) with Smart Eye. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Smart Eye AB has no effect on the direction of Investment i.e., Investment and Smart Eye go up and down completely randomly.

Pair Corralation between Investment and Smart Eye

Assuming the 90 days trading horizon Investment is expected to generate 1.19 times less return on investment than Smart Eye. But when comparing it to its historical volatility, Investment AB Oresund is 2.67 times less risky than Smart Eye. It trades about 0.23 of its potential returns per unit of risk. Smart Eye AB is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  5,555  in Smart Eye AB on April 23, 2025 and sell it today you would earn a total of  1,025  from holding Smart Eye AB or generate 18.45% return on investment over 90 days.

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

Investment AB Oresund  vs.  Smart Eye AB

Investment AB Oresund

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Investment AB Oresund are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Investment unveiled solid returns over the last few months and may actually be approaching a breakup point.

Smart Eye AB

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Smart Eye AB are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Smart Eye unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Investment and Smart Eye

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

The idea behind Investment AB Oresund and Smart Eye 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.