Correlation Between Adecco and AB SKF

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Can any of the company-specific risk be diversified away by investing in both Adecco and AB SKF 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 Adecco and AB SKF into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Adecco Group and AB SKF, you can compare the effects of market volatilities on Adecco and AB SKF 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 Adecco with a short position of AB SKF. Check out your portfolio center. Please also check ongoing floating volatility patterns of Adecco and AB SKF.

Diversification Opportunities for Adecco and AB SKF

0.0
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between Adecco and SKFRY is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Adecco Group and AB SKF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AB SKF and Adecco 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 Adecco Group are associated (or correlated) with AB SKF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AB SKF has no effect on the direction of Adecco i.e., Adecco and AB SKF go up and down completely randomly.

Pair Corralation between Adecco and AB SKF

Assuming the 90 days horizon Adecco Group is expected to under-perform the AB SKF. In addition to that, Adecco is 1.01 times more volatile than AB SKF. It trades about -0.01 of its total potential returns per unit of risk. AB SKF is currently generating about 0.03 per unit of volatility. If you would invest  1,790  in AB SKF on November 28, 2024 and sell it today you would earn a total of  418.00  from holding AB SKF or generate 23.35% return on investment over 90 days.
Time Period3 Months [change]
DirectionFlat 
StrengthInsignificant
Accuracy99.8%
ValuesDaily Returns

Adecco Group  vs.  AB SKF

 Performance 
       Timeline  
Adecco Group 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days Adecco Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Adecco is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.
AB SKF 

Risk-Adjusted Performance

Good

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in AB SKF are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly conflicting basic indicators, AB SKF showed solid returns over the last few months and may actually be approaching a breakup point.

Adecco and AB SKF Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Adecco and AB SKF

The main advantage of trading using opposite Adecco and AB SKF positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Adecco position performs unexpectedly, AB SKF 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 AB SKF will offset losses from the drop in AB SKF's long position.
The idea behind Adecco Group and AB SKF 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.
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.

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