Correlation Between Electrolux Professional and ELECTROLUX
Can any of the company-specific risk be diversified away by investing in both Electrolux Professional and ELECTROLUX 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 Electrolux Professional and ELECTROLUX into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Electrolux Professional AB and ELECTROLUX B ADR2, you can compare the effects of market volatilities on Electrolux Professional and ELECTROLUX 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 Electrolux Professional with a short position of ELECTROLUX. Check out your portfolio center. Please also check ongoing floating volatility patterns of Electrolux Professional and ELECTROLUX.
Diversification Opportunities for Electrolux Professional and ELECTROLUX
0.02 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Electrolux and ELECTROLUX is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Electrolux Professional AB and ELECTROLUX B ADR2 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ELECTROLUX B ADR2 and Electrolux Professional 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 Electrolux Professional AB are associated (or correlated) with ELECTROLUX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ELECTROLUX B ADR2 has no effect on the direction of Electrolux Professional i.e., Electrolux Professional and ELECTROLUX go up and down completely randomly.
Pair Corralation between Electrolux Professional and ELECTROLUX
Assuming the 90 days trading horizon Electrolux Professional AB is expected to generate 0.82 times more return on investment than ELECTROLUX. However, Electrolux Professional AB is 1.23 times less risky than ELECTROLUX. It trades about 0.06 of its potential returns per unit of risk. ELECTROLUX B ADR2 is currently generating about -0.03 per unit of risk. If you would invest 410.00 in Electrolux Professional AB on September 12, 2024 and sell it today you would earn a total of 188.00 from holding Electrolux Professional AB or generate 45.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Electrolux Professional AB vs. ELECTROLUX B ADR2
Performance |
| Timeline |
| Electrolux Professional |
| ELECTROLUX B ADR2 |
Electrolux Professional and ELECTROLUX Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Electrolux Professional and ELECTROLUX
The main advantage of trading using opposite Electrolux Professional and ELECTROLUX positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Electrolux Professional position performs unexpectedly, ELECTROLUX 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 ELECTROLUX will offset losses from the drop in ELECTROLUX's long position.The idea behind Electrolux Professional AB and ELECTROLUX B ADR2 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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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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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