Correlation Between Arion Banki and Hufvudstaden

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

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

Diversification Opportunities for Arion Banki and Hufvudstaden

-0.67

Correlation Coefficient

Arion Banki  Hufvudstaden

Excellent diversification

The 3 months correlation between Arion and Hufvudstaden is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Arion banki hf and Hufvudstaden AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hufvudstaden AB and Arion Banki 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 Arion banki hf are associated (or correlated) with Hufvudstaden. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hufvudstaden AB has no effect on the direction of Arion Banki i.e., Arion Banki and Hufvudstaden go up and down completely randomly.

Pair Corralation between Arion Banki and Hufvudstaden

Assuming the 90 days trading horizon Arion banki hf is expected to generate 1.57 times more return on investment than Hufvudstaden. However, Arion Banki is 1.57 times more volatile than Hufvudstaden AB. It trades about 0.17 of its potential returns per unit of risk. Hufvudstaden AB is currently generating about -0.12 per unit of risk. If you would invest  1,040  in Arion banki hf on September 5, 2024 and sell it today you would earn a total of  215.00  from holding Arion banki hf or generate 20.67% return on investment over 90 days.

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

Arion banki hf  vs.  Hufvudstaden AB

Arion banki hf

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Arion banki hf are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Arion Banki unveiled solid returns over the last few months and may actually be approaching a breakup point.

Hufvudstaden AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hufvudstaden AB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Arion Banki and Hufvudstaden

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

The idea behind Arion banki hf and Hufvudstaden 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.