Correlation Between Know IT and Sweco AB
Can any of the company-specific risk be diversified away by investing in both Know IT and Sweco 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 Know IT and Sweco AB into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Know IT AB and Sweco AB, you can compare the effects of market volatilities on Know IT and Sweco 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 Know IT with a short position of Sweco AB. Check out your portfolio center. Please also check ongoing floating volatility patterns of Know IT and Sweco AB.
Diversification Opportunities for Know IT and Sweco AB
Significant diversification
The 3 months correlation between Know and Sweco is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Know IT AB and Sweco AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sweco AB and Know IT 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 Know IT AB are associated (or correlated) with Sweco AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sweco AB has no effect on the direction of Know IT i.e., Know IT and Sweco AB go up and down completely randomly.
Pair Corralation between Know IT and Sweco AB
Assuming the 90 days trading horizon Know IT AB is expected to under-perform the Sweco AB. In addition to that, Know IT is 1.12 times more volatile than Sweco AB. It trades about -0.12 of its total potential returns per unit of risk. Sweco AB is currently generating about 0.06 per unit of volatility. If you would invest 14,550 in Sweco AB on September 1, 2024 and sell it today you would earn a total of 1,820 from holding Sweco AB or generate 12.51% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Know IT AB vs. Sweco AB
Performance |
| Timeline |
| Know IT AB |
| Sweco AB |
Know IT and Sweco AB Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Know IT and Sweco AB
The main advantage of trading using opposite Know IT and Sweco AB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Know IT position performs unexpectedly, Sweco 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 Sweco AB will offset losses from the drop in Sweco AB's long position.The idea behind Know IT AB and Sweco 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.| Sweco AB vs. Indutrade AB | Sweco AB vs. Beijer Ref AB | Sweco AB vs. Addtech AB | Sweco AB vs. NIBE Industrier 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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