Correlation Between Hufvudstaden and NEW WORLD
Can any of the company-specific risk be diversified away by investing in both Hufvudstaden and NEW WORLD 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 Hufvudstaden and NEW WORLD into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hufvudstaden AB and NEW WORLD DEVCO, you can compare the effects of market volatilities on Hufvudstaden and NEW WORLD 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 Hufvudstaden with a short position of NEW WORLD. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hufvudstaden and NEW WORLD.
Diversification Opportunities for Hufvudstaden and NEW WORLD
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Hufvudstaden and NEW is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Hufvudstaden AB and NEW WORLD DEVCO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NEW WORLD DEVCO and Hufvudstaden 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 Hufvudstaden AB are associated (or correlated) with NEW WORLD. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NEW WORLD DEVCO has no effect on the direction of Hufvudstaden i.e., Hufvudstaden and NEW WORLD go up and down completely randomly.
Pair Corralation between Hufvudstaden and NEW WORLD
Assuming the 90 days trading horizon Hufvudstaden AB is expected to generate 0.59 times more return on investment than NEW WORLD. However, Hufvudstaden AB is 1.7 times less risky than NEW WORLD. It trades about -0.3 of its potential returns per unit of risk. NEW WORLD DEVCO is currently generating about -0.87 per unit of risk. If you would invest 1,064 in Hufvudstaden AB on October 12, 2024 and sell it today you would lose (65.00) from holding Hufvudstaden AB or give up 6.11% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hufvudstaden AB vs. NEW WORLD DEVCO
Performance |
| Timeline |
| Hufvudstaden AB |
| NEW WORLD DEVCO |
Hufvudstaden and NEW WORLD Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hufvudstaden and NEW WORLD
The main advantage of trading using opposite Hufvudstaden and NEW WORLD positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hufvudstaden position performs unexpectedly, NEW WORLD 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 NEW WORLD will offset losses from the drop in NEW WORLD's long position.| Hufvudstaden vs. Superior Plus Corp | Hufvudstaden vs. NMI Holdings | Hufvudstaden vs. SIVERS SEMICONDUCTORS AB | Hufvudstaden vs. Talanx AG |
| NEW WORLD vs. AAC TECHNOLOGHLDGADR | NEW WORLD vs. Minerals Technologies | NEW WORLD vs. Digilife Technologies Limited | NEW WORLD vs. The Japan Steel |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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