Correlation Between HEBA Fastighets and ALM Equity

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

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

Diversification Opportunities for HEBA Fastighets and ALM Equity

0.69

Correlation Coefficient

HEBA Fastighets  ALM Equity

Poor diversification

The 3 months correlation between HEBA and ALM is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding HEBA Fastighets AB and ALM Equity AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ALM Equity AB and HEBA Fastighets 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 HEBA Fastighets AB are associated (or correlated) with ALM Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ALM Equity AB has no effect on the direction of HEBA Fastighets i.e., HEBA Fastighets and ALM Equity go up and down completely randomly.

Pair Corralation between HEBA Fastighets and ALM Equity

Assuming the 90 days trading horizon HEBA Fastighets AB is expected to under-perform the ALM Equity. In addition to that, HEBA Fastighets is 2.62 times more volatile than ALM Equity AB. It trades about -0.04 of its total potential returns per unit of risk. ALM Equity AB is currently generating about -0.08 per unit of volatility. If you would invest  9,011  in ALM Equity AB on September 15, 2024 and sell it today you would lose (301.00) from holding ALM Equity AB or give up 3.34% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.48%
Values	Daily Returns

HEBA Fastighets AB  vs.  ALM Equity AB

HEBA Fastighets AB

Risk-Adjusted Performance

0 of 100

Very Weak

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

ALM Equity AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ALM Equity AB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, ALM Equity is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with HEBA Fastighets and ALM Equity

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

The idea behind HEBA Fastighets AB and ALM Equity 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .