Correlation Between Boliden AB and Skanska AB

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

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

Diversification Opportunities for Boliden AB and Skanska AB

0.68

Correlation Coefficient

Boliden AB  Skanska AB

Poor diversification

The 3 months correlation between Boliden and Skanska is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Boliden AB and Skanska AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Skanska AB and Boliden 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 Boliden AB are associated (or correlated) with Skanska AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Skanska AB has no effect on the direction of Boliden AB i.e., Boliden AB and Skanska AB go up and down completely randomly.

Pair Corralation between Boliden AB and Skanska AB

Assuming the 90 days trading horizon Boliden AB is expected to generate 1.73 times more return on investment than Skanska AB. However, Boliden AB is 1.73 times more volatile than Skanska AB. It trades about 0.09 of its potential returns per unit of risk. Skanska AB is currently generating about 0.15 per unit of risk. 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	Significant
Accuracy	100.0%
Values	Daily Returns

Boliden AB  vs.  Skanska AB

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.

Skanska AB

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Skanska AB are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Skanska AB may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Boliden AB and Skanska AB

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

The idea behind Boliden AB and Skanska 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.