Correlation Between Alfa Laval and AB Electrolux
Can any of the company-specific risk be diversified away by investing in both Alfa Laval and AB 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 Alfa Laval and AB Electrolux into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Alfa Laval AB and AB Electrolux, you can compare the effects of market volatilities on Alfa Laval and AB 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 Alfa Laval with a short position of AB Electrolux. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alfa Laval and AB Electrolux.
Diversification Opportunities for Alfa Laval and AB Electrolux
0.15 | Correlation Coefficient |
Average diversification
The 3 months correlation between Alfa and ELUX-B is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Alfa Laval AB and AB Electrolux in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AB Electrolux and Alfa Laval 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 Alfa Laval AB are associated (or correlated) with AB Electrolux. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AB Electrolux has no effect on the direction of Alfa Laval i.e., Alfa Laval and AB Electrolux go up and down completely randomly.
Pair Corralation between Alfa Laval and AB Electrolux
Assuming the 90 days trading horizon Alfa Laval AB is expected to generate 0.63 times more return on investment than AB Electrolux. However, Alfa Laval AB is 1.59 times less risky than AB Electrolux. It trades about -0.13 of its potential returns per unit of risk. AB Electrolux is currently generating about -0.19 per unit of risk. If you would invest 49,340 in Alfa Laval AB on August 28, 2024 and sell it today you would lose (1,800) from holding Alfa Laval AB or give up 3.65% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Alfa Laval AB vs. AB Electrolux
Performance |
| Timeline |
| Alfa Laval AB |
| AB Electrolux |
Alfa Laval and AB Electrolux Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Alfa Laval and AB Electrolux
The main advantage of trading using opposite Alfa Laval and AB Electrolux positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alfa Laval position performs unexpectedly, AB 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 AB Electrolux will offset losses from the drop in AB Electrolux's long position.| Alfa Laval vs. Sandvik AB | Alfa Laval vs. AB SKF | Alfa Laval vs. ASSA ABLOY AB | Alfa Laval vs. Atlas Copco AB |
| AB Electrolux vs. Precise Biometrics AB | AB Electrolux vs. Anoto Group AB | AB Electrolux vs. Bong AB | AB Electrolux vs. Episurf Medical 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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