Correlation Between Eolus Vind and Sweco AB

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

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

Diversification Opportunities for Eolus Vind and Sweco AB

0.17

Correlation Coefficient

Eolus Vind  Sweco AB

Average diversification

The 3 months correlation between Eolus and Sweco is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Eolus Vind AB and Sweco AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sweco AB and Eolus Vind 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 Eolus Vind 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 Eolus Vind i.e., Eolus Vind and Sweco AB go up and down completely randomly.

Pair Corralation between Eolus Vind and Sweco AB

Assuming the 90 days trading horizon Eolus Vind AB is expected to generate 1.63 times more return on investment than Sweco AB. However, Eolus Vind is 1.63 times more volatile than Sweco AB. It trades about -0.02 of its potential returns per unit of risk. Sweco AB is currently generating about -0.25 per unit of risk. If you would invest  4,670  in Eolus Vind AB on August 31, 2024 and sell it today you would lose (120.00) from holding Eolus Vind AB or give up 2.57% of portfolio value over 90 days.

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

Eolus Vind AB  vs.  Sweco AB

Eolus Vind AB

Risk-Adjusted Performance

0 of 100

Very Weak

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

The main advantage of trading using opposite Eolus Vind and Sweco AB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eolus Vind 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 Eolus Vind 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.

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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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.