Correlation Between Husqvarna and Elekta AB

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

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

Diversification Opportunities for Husqvarna and Elekta AB

0.63

Correlation Coefficient

Husqvarna  Elekta AB

Poor diversification

The 3 months correlation between Husqvarna and Elekta is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Husqvarna AB and Elekta AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Elekta AB 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 Elekta AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Elekta AB has no effect on the direction of Husqvarna i.e., Husqvarna and Elekta AB go up and down completely randomly.

Pair Corralation between Husqvarna and Elekta AB

Assuming the 90 days trading horizon Husqvarna AB is expected to under-perform the Elekta AB. But the stock apears to be less risky and, when comparing its historical volatility, Husqvarna AB is 1.1 times less risky than Elekta AB. The stock trades about -0.02 of its potential returns per unit of risk. The Elekta AB is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  6,530  in Elekta AB on September 15, 2024 and sell it today you would lose (195.00) from holding Elekta AB or give up 2.99% of portfolio value over 90 days.

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

Husqvarna AB  vs.  Elekta AB

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. Despite somewhat strong basic indicators, Husqvarna is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Elekta AB

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Husqvarna and Elekta AB

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

The idea behind Husqvarna AB and Elekta 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.

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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.