Correlation Between Axfood AB and Avanza Bank
Can any of the company-specific risk be diversified away by investing in both Axfood 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 Axfood 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 Axfood AB and Avanza Bank Holding, you can compare the effects of market volatilities on Axfood 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 Axfood AB with a short position of Avanza Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Axfood AB and Avanza Bank.
Diversification Opportunities for Axfood AB and Avanza Bank
0.06 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Axfood and Avanza is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Axfood 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 Axfood 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 Axfood 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 Axfood AB i.e., Axfood AB and Avanza Bank go up and down completely randomly.
Pair Corralation between Axfood AB and Avanza Bank
Assuming the 90 days trading horizon Axfood AB is expected to generate 6.51 times less return on investment than Avanza Bank. But when comparing it to its historical volatility, Axfood AB is 2.89 times less risky than Avanza Bank. It trades about 0.13 of its potential returns per unit of risk. Avanza Bank Holding is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest 27,440 in Avanza Bank Holding on November 2, 2024 and sell it today you would earn a total of 5,500 from holding Avanza Bank Holding or generate 20.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Axfood AB vs. Avanza Bank Holding
Performance |
| Timeline |
| Axfood AB |
| Avanza Bank Holding |
Axfood AB and Avanza Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Axfood AB and Avanza Bank
The main advantage of trading using opposite Axfood AB and Avanza Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Axfood 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.| Axfood AB vs. Castellum AB | Axfood AB vs. Tele2 AB | Axfood AB vs. Investor AB ser | Axfood AB vs. Kinnevik Investment AB |
| 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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