Correlation Between Skanska AB and Hufvudstaden

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

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

Diversification Opportunities for Skanska AB and Hufvudstaden

-0.6

Correlation Coefficient

Skanska AB  Hufvudstaden

Excellent diversification

The 3 months correlation between Skanska and Hufvudstaden is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Skanska AB and Hufvudstaden AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hufvudstaden AB and Skanska AB 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 Skanska AB are associated (or correlated) with Hufvudstaden. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hufvudstaden AB has no effect on the direction of Skanska AB i.e., Skanska AB and Hufvudstaden go up and down completely randomly.

Pair Corralation between Skanska AB and Hufvudstaden

Assuming the 90 days trading horizon Skanska AB is expected to generate 0.97 times more return on investment than Hufvudstaden. However, Skanska AB is 1.03 times less risky than Hufvudstaden. It trades about 0.19 of its potential returns per unit of risk. Hufvudstaden AB is currently generating about -0.15 per unit of risk. If you would invest  20,530  in Skanska AB on September 13, 2024 and sell it today you would earn a total of  2,830  from holding Skanska AB or generate 13.78% return on investment over 90 days.

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

Skanska AB  vs.  Hufvudstaden AB

Skanska AB

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Skanska AB are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Skanska AB unveiled solid returns over the last few months and may actually be approaching a breakup point.

Hufvudstaden AB

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Skanska AB and Hufvudstaden

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

The idea behind Skanska AB and Hufvudstaden 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.