Correlation Between Holmen AB and AB Electrolux
Can any of the company-specific risk be diversified away by investing in both Holmen AB and AB Electrolux 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 Holmen AB and AB Electrolux into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Holmen AB and AB Electrolux, you can compare the effects of market volatilities on Holmen AB and AB Electrolux 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 Holmen AB with a short position of AB Electrolux. Check out your portfolio center. Please also check ongoing floating volatility patterns of Holmen AB and AB Electrolux.
Diversification Opportunities for Holmen AB and AB Electrolux
0.53 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Holmen and ELUX-A is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Holmen AB and AB Electrolux in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AB Electrolux and Holmen 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 Holmen AB are associated (or correlated) with AB Electrolux. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AB Electrolux has no effect on the direction of Holmen AB i.e., Holmen AB and AB Electrolux go up and down completely randomly.
Pair Corralation between Holmen AB and AB Electrolux
Assuming the 90 days trading horizon Holmen AB is expected to under-perform the AB Electrolux. But the stock apears to be less risky and, when comparing its historical volatility, Holmen AB is 2.12 times less risky than AB Electrolux. The stock trades about -0.03 of its potential returns per unit of risk. The AB Electrolux is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest 10,600 in AB Electrolux on September 1, 2024 and sell it today you would lose (100.00) from holding AB Electrolux or give up 0.94% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
Holmen AB vs. AB Electrolux
Performance |
| Timeline |
| Holmen AB |
| AB Electrolux |
Holmen AB and AB Electrolux Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Holmen AB and AB Electrolux
The main advantage of trading using opposite Holmen AB and AB Electrolux positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Holmen AB position performs unexpectedly, AB Electrolux 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 Electrolux will offset losses from the drop in AB Electrolux's long position.| Holmen AB vs. Holmen AB | Holmen AB vs. Tele2 AB | Holmen AB vs. Stora Enso Oyj | Holmen AB vs. BillerudKorsnas AB |
| AB Electrolux vs. AB SKF | AB Electrolux vs. Tele2 AB | AB Electrolux vs. Sandvik AB | AB Electrolux vs. Skanska AB |
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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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