Correlation Between Sovereign Metals and Axfood AB

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

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

Diversification Opportunities for Sovereign Metals and Axfood AB

-0.78

Correlation Coefficient

Sovereign Metals  Axfood AB

Pay attention - limited upside

The 3 months correlation between Sovereign and Axfood is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding Sovereign Metals Limited and Axfood AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Axfood AB and Sovereign Metals 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 Sovereign Metals Limited are associated (or correlated) with Axfood AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Axfood AB has no effect on the direction of Sovereign Metals i.e., Sovereign Metals and Axfood AB go up and down completely randomly.

Pair Corralation between Sovereign Metals and Axfood AB

Assuming the 90 days horizon Sovereign Metals Limited is expected to generate 1.64 times more return on investment than Axfood AB. However, Sovereign Metals is 1.64 times more volatile than Axfood AB. It trades about 0.05 of its potential returns per unit of risk. Axfood AB is currently generating about -0.14 per unit of risk. If you would invest  40.00  in Sovereign Metals Limited on September 23, 2024 and sell it today you would earn a total of  3.00  from holding Sovereign Metals Limited or generate 7.5% return on investment over 90 days.

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

Sovereign Metals Limited  vs.  Axfood AB

Sovereign Metals

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Sovereign Metals Limited are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Sovereign Metals may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Axfood AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Axfood AB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's essential indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Sovereign Metals and Axfood AB

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

The idea behind Sovereign Metals Limited and Axfood 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..