Correlation Between ASSA ABLOY and AB SKF
Can any of the company-specific risk be diversified away by investing in both ASSA ABLOY 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 ASSA ABLOY and AB SKF 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 AB SKF, you can compare the effects of market volatilities on ASSA ABLOY 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 ASSA ABLOY with a short position of AB SKF. Check out your portfolio center. Please also check ongoing floating volatility patterns of ASSA ABLOY and AB SKF.
Diversification Opportunities for ASSA ABLOY and AB SKF
0.32 | Correlation Coefficient |
Weak diversification
The 3 months correlation between ASSA and SKF-B is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding ASSA ABLOY AB and AB SKF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AB SKF 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 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 ASSA ABLOY i.e., ASSA ABLOY and AB SKF go up and down completely randomly.
Pair Corralation between ASSA ABLOY and AB SKF
Assuming the 90 days trading horizon ASSA ABLOY is expected to generate 2.32 times less return on investment than AB SKF. But when comparing it to its historical volatility, ASSA ABLOY AB is 1.44 times less risky than AB SKF. It trades about 0.17 of its potential returns per unit of risk. AB SKF is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest 20,660 in AB SKF on October 23, 2024 and sell it today you would earn a total of 1,400 from holding AB SKF or generate 6.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 93.75% |
| Values | Daily Returns |
ASSA ABLOY AB vs. AB SKF
Performance |
| Timeline |
| ASSA ABLOY AB |
| AB SKF |
ASSA ABLOY and AB SKF Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ASSA ABLOY and AB SKF
The main advantage of trading using opposite ASSA ABLOY and AB SKF positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ASSA ABLOY 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.| ASSA ABLOY vs. Atlas Copco AB | ASSA ABLOY vs. Sandvik AB | ASSA ABLOY vs. Alfa Laval AB | ASSA ABLOY vs. AB SKF |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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