Correlation Between MilDef Group and Saab AB
Can any of the company-specific risk be diversified away by investing in both MilDef Group and Saab 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 MilDef Group and Saab AB into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MilDef Group AB and Saab AB, you can compare the effects of market volatilities on MilDef Group and Saab 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 MilDef Group with a short position of Saab AB. Check out your portfolio center. Please also check ongoing floating volatility patterns of MilDef Group and Saab AB.
Diversification Opportunities for MilDef Group and Saab AB
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between MilDef and Saab is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding MilDef Group AB and Saab AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Saab AB and MilDef Group 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 MilDef Group AB are associated (or correlated) with Saab AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Saab AB has no effect on the direction of MilDef Group i.e., MilDef Group and Saab AB go up and down completely randomly.
Pair Corralation between MilDef Group and Saab AB
Assuming the 90 days trading horizon MilDef Group AB is expected to generate 1.1 times more return on investment than Saab AB. However, MilDef Group is 1.1 times more volatile than Saab AB. It trades about 0.16 of its potential returns per unit of risk. Saab AB is currently generating about 0.0 per unit of risk. If you would invest 6,990 in MilDef Group AB on September 2, 2024 and sell it today you would earn a total of 4,810 from holding MilDef Group AB or generate 68.81% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
MilDef Group AB vs. Saab AB
Performance |
| Timeline |
| MilDef Group AB |
| Saab AB |
MilDef Group and Saab AB Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MilDef Group and Saab AB
The main advantage of trading using opposite MilDef Group and Saab AB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MilDef Group position performs unexpectedly, Saab 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 Saab AB will offset losses from the drop in Saab AB's long position.The idea behind MilDef Group AB and Saab 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.| Saab AB vs. SSAB AB | Saab AB vs. Boliden AB | Saab AB vs. Sandvik AB | Saab AB vs. Telefonaktiebolaget LM Ericsson |
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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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