Correlation Between AAK AB and Sweco AB
Can any of the company-specific risk be diversified away by investing in both AAK AB and Sweco 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 Sweco 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 Sweco AB, you can compare the effects of market volatilities on AAK AB and Sweco 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 Sweco AB. Check out your portfolio center. Please also check ongoing floating volatility patterns of AAK AB and Sweco AB.
Diversification Opportunities for AAK AB and Sweco AB
Weak diversification
The 3 months correlation between AAK and Sweco is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding AAK AB and Sweco AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sweco 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 Sweco AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sweco AB has no effect on the direction of AAK AB i.e., AAK AB and Sweco AB go up and down completely randomly.
Pair Corralation between AAK AB and Sweco AB
Assuming the 90 days trading horizon AAK AB is expected to generate 5.66 times less return on investment than Sweco AB. But when comparing it to its historical volatility, AAK AB is 1.24 times less risky than Sweco AB. It trades about 0.01 of its potential returns per unit of risk. Sweco AB is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 14,700 in Sweco AB on August 29, 2024 and sell it today you would earn a total of 1,300 from holding Sweco AB or generate 8.84% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
AAK AB vs. Sweco AB
Performance |
| Timeline |
| AAK AB |
| Sweco AB |
AAK AB and Sweco AB Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with AAK AB and Sweco AB
The main advantage of trading using opposite AAK AB and Sweco AB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AAK AB position performs unexpectedly, Sweco 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 Sweco AB will offset losses from the drop in Sweco AB's long position.The idea behind AAK AB and Sweco 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.| Sweco AB vs. Indutrade AB | Sweco AB vs. Beijer Ref AB | Sweco AB vs. Addtech AB | Sweco AB vs. NIBE Industrier 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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