Correlation Between Husqvarna and Alfa Laval
Can any of the company-specific risk be diversified away by investing in both Husqvarna and Alfa Laval 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 Alfa Laval into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Husqvarna AB and Alfa Laval AB, you can compare the effects of market volatilities on Husqvarna and Alfa Laval 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 Alfa Laval. Check out your portfolio center. Please also check ongoing floating volatility patterns of Husqvarna and Alfa Laval.
Diversification Opportunities for Husqvarna and Alfa Laval
0.24 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Husqvarna and Alfa is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Husqvarna AB and Alfa Laval AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alfa Laval AB 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 Alfa Laval. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alfa Laval AB has no effect on the direction of Husqvarna i.e., Husqvarna and Alfa Laval go up and down completely randomly.
Pair Corralation between Husqvarna and Alfa Laval
Assuming the 90 days trading horizon Husqvarna AB is expected to under-perform the Alfa Laval. In addition to that, Husqvarna is 1.49 times more volatile than Alfa Laval AB. It trades about -0.04 of its total potential returns per unit of risk. Alfa Laval AB is currently generating about 0.1 per unit of volatility. If you would invest 36,830 in Alfa Laval AB on November 3, 2024 and sell it today you would earn a total of 12,740 from holding Alfa Laval AB or generate 34.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Husqvarna AB vs. Alfa Laval AB
Performance |
| Timeline |
| Husqvarna AB |
| Alfa Laval AB |
Husqvarna and Alfa Laval Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Husqvarna and Alfa Laval
The main advantage of trading using opposite Husqvarna and Alfa Laval positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Husqvarna position performs unexpectedly, Alfa Laval 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 Alfa Laval will offset losses from the drop in Alfa Laval's long position.The idea behind Husqvarna AB and Alfa Laval AB pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Alfa Laval vs. Sandvik AB | Alfa Laval vs. AB SKF | Alfa Laval vs. ASSA ABLOY AB | Alfa Laval vs. Atlas Copco 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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