Correlation Between ASSA ABLOY and Alfa Laval
Can any of the company-specific risk be diversified away by investing in both ASSA ABLOY and Alfa Laval 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 ASSA ABLOY and Alfa Laval into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ASSA ABLOY AB and Alfa Laval AB, you can compare the effects of market volatilities on ASSA ABLOY and Alfa Laval 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 ASSA ABLOY with a short position of Alfa Laval. Check out your portfolio center. Please also check ongoing floating volatility patterns of ASSA ABLOY and Alfa Laval.
Diversification Opportunities for ASSA ABLOY and Alfa Laval
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between ASSA and Alfa is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding ASSA ABLOY AB and Alfa Laval AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alfa Laval AB and ASSA ABLOY 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 ASSA ABLOY AB are associated (or correlated) with Alfa Laval. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alfa Laval AB has no effect on the direction of ASSA ABLOY i.e., ASSA ABLOY and Alfa Laval go up and down completely randomly.
Pair Corralation between ASSA ABLOY and Alfa Laval
Assuming the 90 days trading horizon ASSA ABLOY is expected to generate 1.3 times less return on investment than Alfa Laval. But when comparing it to its historical volatility, ASSA ABLOY AB is 1.13 times less risky than Alfa Laval. It trades about 0.06 of its potential returns per unit of risk. Alfa Laval AB is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 29,738 in Alfa Laval AB on August 24, 2024 and sell it today you would earn a total of 17,802 from holding Alfa Laval AB or generate 59.86% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
ASSA ABLOY AB vs. Alfa Laval AB
Performance |
| Timeline |
| ASSA ABLOY AB |
| Alfa Laval AB |
ASSA ABLOY and Alfa Laval Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ASSA ABLOY and Alfa Laval
The main advantage of trading using opposite ASSA ABLOY and Alfa Laval positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ASSA ABLOY position performs unexpectedly, Alfa Laval 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 Alfa Laval will offset losses from the drop in Alfa Laval's long position.| ASSA ABLOY vs. Atlas Copco AB | ASSA ABLOY vs. Sandvik AB | ASSA ABLOY vs. Alfa Laval AB | ASSA ABLOY vs. AB SKF |
| Alfa Laval vs. Sandvik AB | Alfa Laval vs. AB SKF | Alfa Laval vs. ASSA ABLOY AB | Alfa Laval vs. Atlas Copco 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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