Correlation Between H M and Holmen AB
Can any of the company-specific risk be diversified away by investing in both H M and Holmen AB 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 H M and Holmen AB into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between H M Hennes and Holmen AB, you can compare the effects of market volatilities on H M and Holmen AB 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 H M with a short position of Holmen AB. Check out your portfolio center. Please also check ongoing floating volatility patterns of H M and Holmen AB.
Diversification Opportunities for H M and Holmen AB
Poor diversification
The 3 months correlation between HM-B and Holmen is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding H M Hennes and Holmen AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Holmen AB and H M 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 H M Hennes are associated (or correlated) with Holmen AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Holmen AB has no effect on the direction of H M i.e., H M and Holmen AB go up and down completely randomly.
Pair Corralation between H M and Holmen AB
Assuming the 90 days trading horizon H M Hennes is expected to under-perform the Holmen AB. In addition to that, H M is 1.5 times more volatile than Holmen AB. It trades about -0.28 of its total potential returns per unit of risk. Holmen AB is currently generating about -0.17 per unit of volatility. If you would invest 43,140 in Holmen AB on August 28, 2024 and sell it today you would lose (1,320) from holding Holmen AB or give up 3.06% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
H M Hennes vs. Holmen AB
Performance |
| Timeline |
| H M Hennes |
| Holmen AB |
H M and Holmen AB Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with H M and Holmen AB
The main advantage of trading using opposite H M and Holmen AB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if H M position performs unexpectedly, Holmen AB 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 Holmen AB will offset losses from the drop in Holmen AB's long position.| H M vs. Telefonaktiebolaget LM Ericsson | H M vs. Swedbank AB | H M vs. AB Electrolux | H M 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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