Correlation Between Mekonomen and Alcadon Group
Can any of the company-specific risk be diversified away by investing in both Mekonomen and Alcadon Group 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 Mekonomen and Alcadon Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Mekonomen AB and Alcadon Group AB, you can compare the effects of market volatilities on Mekonomen and Alcadon Group 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 Mekonomen with a short position of Alcadon Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mekonomen and Alcadon Group.
Diversification Opportunities for Mekonomen and Alcadon Group
-0.2 | Correlation Coefficient |
Good diversification
The 3 months correlation between Mekonomen and Alcadon is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Mekonomen AB and Alcadon Group AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alcadon Group AB and Mekonomen 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 Mekonomen AB are associated (or correlated) with Alcadon Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alcadon Group AB has no effect on the direction of Mekonomen i.e., Mekonomen and Alcadon Group go up and down completely randomly.
Pair Corralation between Mekonomen and Alcadon Group
Assuming the 90 days trading horizon Mekonomen AB is expected to generate 0.73 times more return on investment than Alcadon Group. However, Mekonomen AB is 1.36 times less risky than Alcadon Group. It trades about -0.19 of its potential returns per unit of risk. Alcadon Group AB is currently generating about -0.16 per unit of risk. If you would invest 14,125 in Mekonomen AB on August 30, 2024 and sell it today you would lose (965.00) from holding Mekonomen AB or give up 6.83% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Mekonomen AB vs. Alcadon Group AB
Performance |
| Timeline |
| Mekonomen AB |
| Alcadon Group AB |
Mekonomen and Alcadon Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Mekonomen and Alcadon Group
The main advantage of trading using opposite Mekonomen and Alcadon Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mekonomen position performs unexpectedly, Alcadon Group 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 Alcadon Group will offset losses from the drop in Alcadon Group's long position.| Mekonomen vs. Sinch AB | Mekonomen vs. Hexatronic Group AB | Mekonomen vs. NIBE Industrier AB | Mekonomen vs. Evolution AB |
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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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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