Correlation Between BillerudKorsnas and Profoto Holding
Can any of the company-specific risk be diversified away by investing in both BillerudKorsnas and Profoto Holding 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 BillerudKorsnas and Profoto Holding into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BillerudKorsnas AB and Profoto Holding AB, you can compare the effects of market volatilities on BillerudKorsnas and Profoto Holding 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 BillerudKorsnas with a short position of Profoto Holding. Check out your portfolio center. Please also check ongoing floating volatility patterns of BillerudKorsnas and Profoto Holding.
Diversification Opportunities for BillerudKorsnas and Profoto Holding
-0.17 | Correlation Coefficient |
Good diversification
The 3 months correlation between BillerudKorsnas and Profoto is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding BillerudKorsnas AB and Profoto Holding AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Profoto Holding AB and BillerudKorsnas 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 BillerudKorsnas AB are associated (or correlated) with Profoto Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Profoto Holding AB has no effect on the direction of BillerudKorsnas i.e., BillerudKorsnas and Profoto Holding go up and down completely randomly.
Pair Corralation between BillerudKorsnas and Profoto Holding
Assuming the 90 days trading horizon BillerudKorsnas AB is expected to generate 0.66 times more return on investment than Profoto Holding. However, BillerudKorsnas AB is 1.51 times less risky than Profoto Holding. It trades about 0.06 of its potential returns per unit of risk. Profoto Holding AB is currently generating about -0.06 per unit of risk. If you would invest 9,283 in BillerudKorsnas AB on December 5, 2024 and sell it today you would earn a total of 2,557 from holding BillerudKorsnas AB or generate 27.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
BillerudKorsnas AB vs. Profoto Holding AB
Performance |
| Timeline |
| BillerudKorsnas AB |
| Profoto Holding AB |
BillerudKorsnas and Profoto Holding Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BillerudKorsnas and Profoto Holding
The main advantage of trading using opposite BillerudKorsnas and Profoto Holding positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BillerudKorsnas position performs unexpectedly, Profoto Holding 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 Profoto Holding will offset losses from the drop in Profoto Holding's long position.| BillerudKorsnas vs. Holmen AB | ||
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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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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