Correlation Between AB SKF and Industrivarden
Can any of the company-specific risk be diversified away by investing in both AB SKF and Industrivarden 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 Industrivarden into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AB SKF and Industrivarden AB ser, you can compare the effects of market volatilities on AB SKF and Industrivarden 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 Industrivarden. Check out your portfolio center. Please also check ongoing floating volatility patterns of AB SKF and Industrivarden.
Diversification Opportunities for AB SKF and Industrivarden
0.39 | Correlation Coefficient |
Weak diversification
The 3 months correlation between SKF-B and Industrivarden is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding AB SKF and Industrivarden AB ser in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Industrivarden AB ser 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 Industrivarden. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Industrivarden AB ser has no effect on the direction of AB SKF i.e., AB SKF and Industrivarden go up and down completely randomly.
Pair Corralation between AB SKF and Industrivarden
Assuming the 90 days trading horizon AB SKF is expected to generate 1.51 times more return on investment than Industrivarden. However, AB SKF is 1.51 times more volatile than Industrivarden AB ser. It trades about 0.16 of its potential returns per unit of risk. Industrivarden AB ser is currently generating about -0.06 per unit of risk. If you would invest 21,230 in AB SKF on September 12, 2024 and sell it today you would earn a total of 1,140 from holding AB SKF or generate 5.37% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
AB SKF vs. Industrivarden AB ser
Performance |
| Timeline |
| AB SKF |
| Industrivarden AB ser |
AB SKF and Industrivarden Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with AB SKF and Industrivarden
The main advantage of trading using opposite AB SKF and Industrivarden positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AB SKF position performs unexpectedly, Industrivarden 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 Industrivarden will offset losses from the drop in Industrivarden's long position.| AB SKF vs. Industrivarden AB ser | AB SKF vs. Trelleborg AB | AB SKF vs. Svenska Cellulosa Aktiebolaget | AB SKF vs. Alfa Laval AB |
| Industrivarden vs. L E Lundbergfretagen | Industrivarden vs. Industrivarden AB ser | Industrivarden vs. Svenska Handelsbanken AB | Industrivarden vs. Investment AB Latour |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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