Correlation Between Mekonomen and Hufvudstaden
Can any of the company-specific risk be diversified away by investing in both Mekonomen and Hufvudstaden 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 Hufvudstaden into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Mekonomen AB and Hufvudstaden AB, you can compare the effects of market volatilities on Mekonomen and Hufvudstaden 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 Hufvudstaden. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mekonomen and Hufvudstaden.
Diversification Opportunities for Mekonomen and Hufvudstaden
-0.18 | Correlation Coefficient |
Good diversification
The 3 months correlation between Mekonomen and Hufvudstaden is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Mekonomen AB and Hufvudstaden AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hufvudstaden 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 Hufvudstaden. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hufvudstaden AB has no effect on the direction of Mekonomen i.e., Mekonomen and Hufvudstaden go up and down completely randomly.
Pair Corralation between Mekonomen and Hufvudstaden
Assuming the 90 days trading horizon Mekonomen AB is expected to under-perform the Hufvudstaden. In addition to that, Mekonomen is 1.31 times more volatile than Hufvudstaden AB. It trades about -0.14 of its total potential returns per unit of risk. Hufvudstaden AB is currently generating about -0.18 per unit of volatility. If you would invest 12,920 in Hufvudstaden AB on August 29, 2024 and sell it today you would lose (670.00) from holding Hufvudstaden AB or give up 5.19% 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. Hufvudstaden AB
Performance |
| Timeline |
| Mekonomen AB |
| Hufvudstaden AB |
Mekonomen and Hufvudstaden Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Mekonomen and Hufvudstaden
The main advantage of trading using opposite Mekonomen and Hufvudstaden positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mekonomen position performs unexpectedly, Hufvudstaden 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 Hufvudstaden will offset losses from the drop in Hufvudstaden's long position.| Mekonomen vs. Clas Ohlson AB | Mekonomen vs. Bilia AB | Mekonomen vs. Byggmax Group AB | Mekonomen vs. Peab AB |
| Hufvudstaden vs. FastPartner AB | Hufvudstaden vs. ALM Equity AB | Hufvudstaden vs. KABE Group AB | Hufvudstaden vs. IAR Systems Group |
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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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