Correlation Between Arjo AB and Avanza Bank
Can any of the company-specific risk be diversified away by investing in both Arjo AB and Avanza Bank 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 Arjo AB and Avanza Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Arjo AB and Avanza Bank Holding, you can compare the effects of market volatilities on Arjo AB and Avanza Bank 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 Arjo AB with a short position of Avanza Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Arjo AB and Avanza Bank.
Diversification Opportunities for Arjo AB and Avanza Bank
0.03 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Arjo and Avanza is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Arjo AB and Avanza Bank Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avanza Bank Holding and Arjo 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 Arjo AB are associated (or correlated) with Avanza Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Avanza Bank Holding has no effect on the direction of Arjo AB i.e., Arjo AB and Avanza Bank go up and down completely randomly.
Pair Corralation between Arjo AB and Avanza Bank
Assuming the 90 days trading horizon Arjo AB is expected to generate 6.93 times less return on investment than Avanza Bank. In addition to that, Arjo AB is 1.07 times more volatile than Avanza Bank Holding. It trades about 0.01 of its total potential returns per unit of risk. Avanza Bank Holding is currently generating about 0.04 per unit of volatility. If you would invest 22,116 in Avanza Bank Holding on October 21, 2024 and sell it today you would earn a total of 6,764 from holding Avanza Bank Holding or generate 30.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Arjo AB vs. Avanza Bank Holding
Performance |
| Timeline |
| Arjo AB |
| Avanza Bank Holding |
Arjo AB and Avanza Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Arjo AB and Avanza Bank
The main advantage of trading using opposite Arjo AB and Avanza Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Arjo AB position performs unexpectedly, Avanza Bank 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 Avanza Bank will offset losses from the drop in Avanza Bank's long position.The idea behind Arjo AB and Avanza Bank Holding 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.| Avanza Bank vs. Axfood AB | Avanza Bank vs. Samhllsbyggnadsbolaget i Norden | Avanza Bank vs. Castellum AB | Avanza Bank vs. Investor AB ser |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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