Correlation Between Axfood AB and Patrick Industries
Can any of the company-specific risk be diversified away by investing in both Axfood AB and Patrick Industries 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 Patrick Industries into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Axfood AB and Patrick Industries, you can compare the effects of market volatilities on Axfood AB and Patrick Industries 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 Patrick Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Axfood AB and Patrick Industries.
Diversification Opportunities for Axfood AB and Patrick Industries
0.49 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Axfood and Patrick is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Axfood AB and Patrick Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Patrick Industries 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 Patrick Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Patrick Industries has no effect on the direction of Axfood AB i.e., Axfood AB and Patrick Industries go up and down completely randomly.
Pair Corralation between Axfood AB and Patrick Industries
Assuming the 90 days trading horizon Axfood AB is expected to generate 0.62 times more return on investment than Patrick Industries. However, Axfood AB is 1.61 times less risky than Patrick Industries. It trades about 0.12 of its potential returns per unit of risk. Patrick Industries is currently generating about 0.05 per unit of risk. If you would invest 1,980 in Axfood AB on November 17, 2024 and sell it today you would earn a total of 75.00 from holding Axfood AB or generate 3.79% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Axfood AB vs. Patrick Industries
Performance |
Timeline |
Axfood AB |
Patrick Industries |
Axfood AB and Patrick Industries Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Axfood AB and Patrick Industries
The main advantage of trading using opposite Axfood AB and Patrick Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Axfood AB position performs unexpectedly, Patrick Industries 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 Patrick Industries will offset losses from the drop in Patrick Industries' long position.Axfood AB vs. Direct Line Insurance | ||
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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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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