Correlation Between AB SKF and Skanska AB
Can any of the company-specific risk be diversified away by investing in both AB SKF and Skanska 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 AB SKF and Skanska AB into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AB SKF and Skanska AB, you can compare the effects of market volatilities on AB SKF and Skanska 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 AB SKF with a short position of Skanska AB. Check out your portfolio center. Please also check ongoing floating volatility patterns of AB SKF and Skanska AB.
Diversification Opportunities for AB SKF and Skanska AB
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between SKF-B and Skanska is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding AB SKF and Skanska AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Skanska AB 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 Skanska AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Skanska AB has no effect on the direction of AB SKF i.e., AB SKF and Skanska AB go up and down completely randomly.
Pair Corralation between AB SKF and Skanska AB
Assuming the 90 days trading horizon AB SKF is expected to generate 1.58 times more return on investment than Skanska AB. However, AB SKF is 1.58 times more volatile than Skanska AB. It trades about 0.0 of its potential returns per unit of risk. Skanska AB is currently generating about -0.04 per unit of risk. If you would invest 20,300 in AB SKF on August 29, 2024 and sell it today you would lose (60.00) from holding AB SKF or give up 0.3% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
AB SKF vs. Skanska AB
Performance |
| Timeline |
| AB SKF |
| Skanska AB |
AB SKF and Skanska AB Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with AB SKF and Skanska AB
The main advantage of trading using opposite AB SKF and Skanska AB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AB SKF position performs unexpectedly, Skanska 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 Skanska AB will offset losses from the drop in Skanska AB's long position.The idea behind AB SKF and Skanska 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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