Correlation Between Industrivarden and AB SKF

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

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

Diversification Opportunities for Industrivarden and AB SKF

0.25

Correlation Coefficient

Industrivarden  AB SKF

Modest diversification

The 3 months correlation between Industrivarden and SKF-B is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Industrivarden AB ser and AB SKF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AB SKF and Industrivarden 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 Industrivarden AB ser 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 Industrivarden i.e., Industrivarden and AB SKF go up and down completely randomly.

Pair Corralation between Industrivarden and AB SKF

Assuming the 90 days trading horizon Industrivarden is expected to generate 1.08 times less return on investment than AB SKF. But when comparing it to its historical volatility, Industrivarden AB ser is 1.57 times less risky than AB SKF. It trades about 0.08 of its potential returns per unit of risk. AB SKF is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  15,010  in AB SKF on September 14, 2024 and sell it today you would earn a total of  6,940  from holding AB SKF or generate 46.24% return on investment over 90 days.

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

Industrivarden AB ser  vs.  AB SKF

Industrivarden AB ser

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Industrivarden AB ser are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental indicators, Industrivarden is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

AB SKF

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in AB SKF are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, AB SKF unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Industrivarden and AB SKF

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

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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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.