Correlation Between Alfa Laval and Boliden AB

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

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

Diversification Opportunities for Alfa Laval and Boliden AB

0.84

Correlation Coefficient

Alfa Laval  Boliden AB

Very poor diversification

The 3 months correlation between Alfa and Boliden is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Alfa Laval AB and Boliden AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boliden AB and Alfa Laval 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 Alfa Laval AB are associated (or correlated) with Boliden AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Boliden AB has no effect on the direction of Alfa Laval i.e., Alfa Laval and Boliden AB go up and down completely randomly.

Pair Corralation between Alfa Laval and Boliden AB

Assuming the 90 days trading horizon Alfa Laval is expected to generate 4.05 times less return on investment than Boliden AB. But when comparing it to its historical volatility, Alfa Laval AB is 1.55 times less risky than Boliden AB. It trades about 0.04 of its potential returns per unit of risk. Boliden AB is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  29,360  in Boliden AB on September 3, 2024 and sell it today you would earn a total of  3,180  from holding Boliden AB or generate 10.83% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Alfa Laval AB  vs.  Boliden AB

Alfa Laval AB

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Alfa Laval AB are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Alfa Laval is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Boliden AB

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Boliden AB are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain essential indicators, Boliden AB may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Alfa Laval and Boliden AB

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

The idea behind Alfa Laval AB and Boliden 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.

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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 Global Correlations module to find global opportunities by holding instruments from different markets.