Correlation Between Sweco AB and Husqvarna
Can any of the company-specific risk be diversified away by investing in both Sweco AB and Husqvarna 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 Sweco AB and Husqvarna into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sweco AB and Husqvarna AB, you can compare the effects of market volatilities on Sweco AB and Husqvarna 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 Sweco AB with a short position of Husqvarna. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sweco AB and Husqvarna.
Diversification Opportunities for Sweco AB and Husqvarna
Poor diversification
The 3 months correlation between Sweco and Husqvarna is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Sweco AB and Husqvarna AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Husqvarna AB and Sweco 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 Sweco AB are associated (or correlated) with Husqvarna. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Husqvarna AB has no effect on the direction of Sweco AB i.e., Sweco AB and Husqvarna go up and down completely randomly.
Pair Corralation between Sweco AB and Husqvarna
Assuming the 90 days trading horizon Sweco AB is expected to generate 1.12 times more return on investment than Husqvarna. However, Sweco AB is 1.12 times more volatile than Husqvarna AB. It trades about 0.05 of its potential returns per unit of risk. Husqvarna AB is currently generating about 0.0 per unit of risk. If you would invest 9,921 in Sweco AB on September 4, 2024 and sell it today you would earn a total of 6,629 from holding Sweco AB or generate 66.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sweco AB vs. Husqvarna AB
Performance |
| Timeline |
| Sweco AB |
| Husqvarna AB |
Sweco AB and Husqvarna Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sweco AB and Husqvarna
The main advantage of trading using opposite Sweco AB and Husqvarna positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sweco AB position performs unexpectedly, Husqvarna 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 Husqvarna will offset losses from the drop in Husqvarna's long position.The idea behind Sweco AB and Husqvarna 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.| Husqvarna vs. Sandvik AB | Husqvarna vs. AB Electrolux | Husqvarna vs. Alfa Laval AB | Husqvarna vs. Skanska 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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