Correlation Between AAK AB and Holmen AB
Can any of the company-specific risk be diversified away by investing in both AAK AB and Holmen 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 AAK AB and Holmen AB into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AAK AB and Holmen AB, you can compare the effects of market volatilities on AAK AB and Holmen 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 AAK AB with a short position of Holmen AB. Check out your portfolio center. Please also check ongoing floating volatility patterns of AAK AB and Holmen AB.
Diversification Opportunities for AAK AB and Holmen AB
Poor diversification
The 3 months correlation between AAK and Holmen is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding AAK AB and Holmen AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Holmen AB and AAK AB 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 AAK AB are associated (or correlated) with Holmen AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Holmen AB has no effect on the direction of AAK AB i.e., AAK AB and Holmen AB go up and down completely randomly.
Pair Corralation between AAK AB and Holmen AB
Assuming the 90 days trading horizon AAK AB is expected to generate 1.21 times more return on investment than Holmen AB. However, AAK AB is 1.21 times more volatile than Holmen AB. It trades about 0.01 of its potential returns per unit of risk. Holmen AB is currently generating about -0.05 per unit of risk. If you would invest 29,440 in AAK AB on August 29, 2024 and sell it today you would earn a total of 200.00 from holding AAK AB or generate 0.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
AAK AB vs. Holmen AB
Performance |
| Timeline |
| AAK AB |
| Holmen AB |
AAK AB and Holmen AB Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with AAK AB and Holmen AB
The main advantage of trading using opposite AAK AB and Holmen AB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AAK AB position performs unexpectedly, Holmen 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 Holmen AB will offset losses from the drop in Holmen AB's long position.The idea behind AAK AB and Holmen 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.| Holmen AB vs. Svenska Cellulosa Aktiebolaget | Holmen AB vs. BillerudKorsnas AB | Holmen AB vs. Boliden AB | Holmen AB vs. Husqvarna AB |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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