Correlation Between Boliden AB and AB SKF

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

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

Diversification Opportunities for Boliden AB and AB SKF

0.68

Correlation Coefficient

Boliden AB  AB SKF

Poor diversification

The 3 months correlation between Boliden and SKF-B is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Boliden AB and AB SKF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AB SKF 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 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 Boliden AB i.e., Boliden AB and AB SKF go up and down completely randomly.

Pair Corralation between Boliden AB and AB SKF

Assuming the 90 days trading horizon Boliden AB is expected to under-perform the AB SKF. In addition to that, Boliden AB is 1.22 times more volatile than AB SKF. It trades about 0.0 of its total potential returns per unit of risk. AB SKF is currently generating about 0.04 per unit of volatility. If you would invest  16,136  in AB SKF on September 3, 2024 and sell it today you would earn a total of  4,814  from holding AB SKF or generate 29.83% 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.  AB SKF

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.

AB SKF

Risk-Adjusted Performance

7 of 100

OK

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

Pair Trading with Boliden AB and AB SKF

The main advantage of trading using opposite Boliden AB and AB SKF positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Boliden AB 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 Boliden AB 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.