Correlation Between Beijer Ref and Sweco AB

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

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

Diversification Opportunities for Beijer Ref and Sweco AB

0.25

Correlation Coefficient

Beijer Ref  Sweco AB

Modest diversification

The 3 months correlation between Beijer and Sweco is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Beijer Ref AB and Sweco AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sweco AB and Beijer Ref 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 Beijer Ref AB are associated (or correlated) with Sweco AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sweco AB has no effect on the direction of Beijer Ref i.e., Beijer Ref and Sweco AB go up and down completely randomly.

Pair Corralation between Beijer Ref and Sweco AB

Assuming the 90 days trading horizon Beijer Ref AB is expected to under-perform the Sweco AB. In addition to that, Beijer Ref is 1.19 times more volatile than Sweco AB. It trades about -0.03 of its total potential returns per unit of risk. Sweco AB is currently generating about -0.03 per unit of volatility. If you would invest  16,800  in Sweco AB on August 31, 2024 and sell it today you would lose (730.00) from holding Sweco AB or give up 4.35% of portfolio value over 90 days.

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

Beijer Ref AB  vs.  Sweco AB

Beijer Ref AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Beijer Ref AB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong forward indicators, Beijer Ref is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Sweco AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sweco AB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong technical and fundamental indicators, Sweco AB is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Beijer Ref and Sweco AB

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

The idea behind Beijer Ref AB and Sweco 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.