Correlation Between Mekonomen and Scandic Hotels
Can any of the company-specific risk be diversified away by investing in both Mekonomen and Scandic Hotels 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 Scandic Hotels into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Mekonomen AB and Scandic Hotels Group, you can compare the effects of market volatilities on Mekonomen and Scandic Hotels 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 Scandic Hotels. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mekonomen and Scandic Hotels.
Diversification Opportunities for Mekonomen and Scandic Hotels
0.41 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Mekonomen and Scandic is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Mekonomen AB and Scandic Hotels Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Scandic Hotels Group 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 Scandic Hotels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Scandic Hotels Group has no effect on the direction of Mekonomen i.e., Mekonomen and Scandic Hotels go up and down completely randomly.
Pair Corralation between Mekonomen and Scandic Hotels
Assuming the 90 days trading horizon Mekonomen AB is expected to generate 1.28 times more return on investment than Scandic Hotels. However, Mekonomen is 1.28 times more volatile than Scandic Hotels Group. It trades about 0.08 of its potential returns per unit of risk. Scandic Hotels Group is currently generating about 0.05 per unit of risk. If you would invest 11,225 in Mekonomen AB on September 28, 2024 and sell it today you would earn a total of 1,835 from holding Mekonomen AB or generate 16.35% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Mekonomen AB vs. Scandic Hotels Group
Performance |
| Timeline |
| Mekonomen AB |
| Scandic Hotels Group |
Mekonomen and Scandic Hotels Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Mekonomen and Scandic Hotels
The main advantage of trading using opposite Mekonomen and Scandic Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mekonomen position performs unexpectedly, Scandic Hotels 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 Scandic Hotels will offset losses from the drop in Scandic Hotels' long position.The idea behind Mekonomen AB and Scandic Hotels Group 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.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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
Other Complementary Tools
| Stocks Directory Find actively traded stocks across global markets | |
| ETF Categories List of ETF categories grouped based on various criteria, such as the investment strategy or type of investments | |
| Portfolio File Import Quickly import all of your third-party portfolios from your local drive in csv format | |
| Equity Analysis Research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities | |
| Portfolio Anywhere Track or share privately all of your investments from the convenience of any device |