Correlation Between Adecco and AB SKF

Can any of the company-specific risk be diversified away by investing in both Adecco and AB SKF 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 Adecco and AB SKF into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Adecco Group and AB SKF, you can compare the effects of market volatilities on Adecco and AB SKF 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 Adecco with a short position of AB SKF. Check out your portfolio center. Please also check ongoing floating volatility patterns of Adecco and AB SKF.

Diversification Opportunities for Adecco and AB SKF

-0.05

Correlation Coefficient

Adecco  AB SKF

Good diversification

The 3 months correlation between Adecco and SKFRY is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Adecco Group and AB SKF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AB SKF and Adecco 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 Adecco Group are associated (or correlated) with AB SKF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AB SKF has no effect on the direction of Adecco i.e., Adecco and AB SKF go up and down completely randomly.

Pair Corralation between Adecco and AB SKF

Assuming the 90 days horizon Adecco Group is expected to under-perform the AB SKF. But the pink sheet apears to be less risky and, when comparing its historical volatility, Adecco Group is 1.05 times less risky than AB SKF. The pink sheet trades about -0.11 of its potential returns per unit of risk. The AB SKF is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  1,768  in AB SKF on September 14, 2024 and sell it today you would earn a total of  229.00  from holding AB SKF or generate 12.95% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.63%
Values	Daily Returns

Adecco Group  vs.  AB SKF

Adecco Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Adecco Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

AB SKF

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in AB SKF are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, AB SKF may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Adecco and AB SKF

The main advantage of trading using opposite Adecco and AB SKF positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Adecco position performs unexpectedly, AB SKF 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 SKF will offset losses from the drop in AB SKF's long position.

The idea behind Adecco Group and AB SKF 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.