Correlation Between Husqvarna and Makita
Can any of the company-specific risk be diversified away by investing in both Husqvarna and Makita 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 Husqvarna and Makita into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Husqvarna AB and Makita, you can compare the effects of market volatilities on Husqvarna and Makita 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 Husqvarna with a short position of Makita. Check out your portfolio center. Please also check ongoing floating volatility patterns of Husqvarna and Makita.
Diversification Opportunities for Husqvarna and Makita
Modest diversification
The 3 months correlation between Husqvarna and Makita is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Husqvarna AB and Makita in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Makita and Husqvarna 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 Husqvarna AB are associated (or correlated) with Makita. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Makita has no effect on the direction of Husqvarna i.e., Husqvarna and Makita go up and down completely randomly.
Pair Corralation between Husqvarna and Makita
Assuming the 90 days horizon Husqvarna AB is expected to under-perform the Makita. In addition to that, Husqvarna is 1.16 times more volatile than Makita. It trades about -0.06 of its total potential returns per unit of risk. Makita is currently generating about -0.01 per unit of volatility. If you would invest 2,863 in Makita on August 28, 2024 and sell it today you would lose (134.00) from holding Makita or give up 4.68% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 53.85% |
| Values | Daily Returns |
Husqvarna AB vs. Makita
Performance |
| Timeline |
| Husqvarna AB |
| Makita |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Husqvarna and Makita Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Husqvarna and Makita
The main advantage of trading using opposite Husqvarna and Makita positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Husqvarna position performs unexpectedly, Makita 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 Makita will offset losses from the drop in Makita's long position.| Husqvarna vs. SMC Corp Japan | Husqvarna vs. Hong Kong Exchange | Husqvarna vs. AIA Group Ltd | Husqvarna vs. Techtronic Industries |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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