Correlation Between Husqvarna and Techtronic Industries

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

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

Diversification Opportunities for Husqvarna and Techtronic Industries

0.65

Correlation Coefficient

Husqvarna  Techtronic Industries

Poor diversification

The 3 months correlation between Husqvarna and Techtronic is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Husqvarna AB and Techtronic Industries Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Techtronic Industries and Husqvarna 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 Husqvarna AB are associated (or correlated) with Techtronic Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Techtronic Industries has no effect on the direction of Husqvarna i.e., Husqvarna and Techtronic Industries go up and down completely randomly.

Pair Corralation between Husqvarna and Techtronic Industries

Assuming the 90 days horizon Husqvarna AB is expected to under-perform the Techtronic Industries. But the pink sheet apears to be less risky and, when comparing its historical volatility, Husqvarna AB is 1.11 times less risky than Techtronic Industries. The pink sheet trades about -0.09 of its potential returns per unit of risk. The Techtronic Industries Ltd is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  6,729  in Techtronic Industries Ltd on September 13, 2024 and sell it today you would earn a total of  536.00  from holding Techtronic Industries Ltd or generate 7.97% return on investment over 90 days.

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

Husqvarna AB  vs.  Techtronic Industries Ltd

Husqvarna AB

Risk-Adjusted Performance

0 of 100

Very Weak

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

Techtronic Industries

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Techtronic Industries Ltd are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak fundamental indicators, Techtronic Industries may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Husqvarna and Techtronic Industries

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

The idea behind Husqvarna AB and Techtronic Industries Ltd 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.