Correlation Between Boliden AB and AB SKF
Can any of the company-specific risk be diversified away by investing in both Boliden AB 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 Boliden AB and AB SKF into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Boliden AB and AB SKF, you can compare the effects of market volatilities on Boliden AB 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 Boliden AB with a short position of AB SKF. Check out your portfolio center. Please also check ongoing floating volatility patterns of Boliden AB and AB SKF.
Diversification Opportunities for Boliden AB and AB SKF
0.47 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Boliden and SKF-B is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Boliden AB and AB SKF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AB SKF and Boliden 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 Boliden 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 Boliden AB i.e., Boliden AB and AB SKF go up and down completely randomly.
Pair Corralation between Boliden AB and AB SKF
Assuming the 90 days trading horizon Boliden AB is expected to generate 1.3 times less return on investment than AB SKF. In addition to that, Boliden AB is 1.15 times more volatile than AB SKF. It trades about 0.15 of its total potential returns per unit of risk. AB SKF is currently generating about 0.22 per unit of volatility. If you would invest 20,980 in AB SKF on November 3, 2024 and sell it today you would earn a total of 1,500 from holding AB SKF or generate 7.15% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Boliden AB vs. AB SKF
Performance |
| Timeline |
| Boliden AB |
| AB SKF |
Boliden AB and AB SKF Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Boliden AB and AB SKF
The main advantage of trading using opposite Boliden AB and AB SKF positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Boliden AB 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.| Boliden AB vs. Sandvik AB | Boliden AB vs. AB SKF | Boliden AB vs. Alfa Laval AB | Boliden AB vs. AB Electrolux |
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 Valuation module to check real value of public entities based on technical and fundamental data.
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