Correlation Between Skanska AB and NCC AB
Can any of the company-specific risk be diversified away by investing in both Skanska AB and NCC 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 Skanska AB and NCC AB into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Skanska AB and NCC AB, you can compare the effects of market volatilities on Skanska AB and NCC 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 Skanska AB with a short position of NCC AB. Check out your portfolio center. Please also check ongoing floating volatility patterns of Skanska AB and NCC AB.
Diversification Opportunities for Skanska AB and NCC AB
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Skanska and NCC is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Skanska AB and NCC AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NCC AB and Skanska AB 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 Skanska AB are associated (or correlated) with NCC AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NCC AB has no effect on the direction of Skanska AB i.e., Skanska AB and NCC AB go up and down completely randomly.
Pair Corralation between Skanska AB and NCC AB
Assuming the 90 days trading horizon Skanska AB is expected to generate 1.47 times less return on investment than NCC AB. But when comparing it to its historical volatility, Skanska AB is 1.01 times less risky than NCC AB. It trades about 0.07 of its potential returns per unit of risk. NCC AB is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 10,663 in NCC AB on August 29, 2024 and sell it today you would earn a total of 5,527 from holding NCC AB or generate 51.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Skanska AB vs. NCC AB
Performance |
| Timeline |
| Skanska AB |
| NCC AB |
Skanska AB and NCC AB Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Skanska AB and NCC AB
The main advantage of trading using opposite Skanska AB and NCC AB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Skanska AB position performs unexpectedly, NCC 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 NCC AB will offset losses from the drop in NCC AB's long position.The idea behind Skanska AB and NCC 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.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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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