Correlation Between AB SKF and AB Electrolux
Can any of the company-specific risk be diversified away by investing in both AB SKF and AB Electrolux 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 AB SKF and AB Electrolux into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AB SKF and AB Electrolux, you can compare the effects of market volatilities on AB SKF and AB Electrolux 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 AB SKF with a short position of AB Electrolux. Check out your portfolio center. Please also check ongoing floating volatility patterns of AB SKF and AB Electrolux.
Diversification Opportunities for AB SKF and AB Electrolux
0.45 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between SKF-A and ELUX-A is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding AB SKF and AB Electrolux in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AB Electrolux and AB SKF 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 AB SKF are associated (or correlated) with AB Electrolux. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AB Electrolux has no effect on the direction of AB SKF i.e., AB SKF and AB Electrolux go up and down completely randomly.
Pair Corralation between AB SKF and AB Electrolux
Assuming the 90 days trading horizon AB SKF is expected to generate 0.61 times more return on investment than AB Electrolux. However, AB SKF is 1.63 times less risky than AB Electrolux. It trades about 0.02 of its potential returns per unit of risk. AB Electrolux is currently generating about -0.01 per unit of risk. If you would invest 22,500 in AB SKF on November 28, 2024 and sell it today you would earn a total of 700.00 from holding AB SKF or generate 3.11% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
AB SKF vs. AB Electrolux
Performance |
| Timeline |
| AB SKF |
| AB Electrolux |
AB SKF and AB Electrolux Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with AB SKF and AB Electrolux
The main advantage of trading using opposite AB SKF and AB Electrolux positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AB SKF position performs unexpectedly, AB Electrolux 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 AB Electrolux will offset losses from the drop in AB Electrolux's long position.| AB SKF vs. AB SKF | AB SKF vs. Industrivarden AB ser | AB SKF vs. Trelleborg AB | AB SKF vs. Svenska Cellulosa Aktiebolaget |
| AB Electrolux vs. AB Electrolux | AB Electrolux vs. Tele2 AB | AB Electrolux vs. Husqvarna AB | AB Electrolux vs. Kinnevik Investment AB |
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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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