Correlation Between Sweco AB and Lindab International

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

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

Diversification Opportunities for Sweco AB and Lindab International

0.31

Correlation Coefficient

Sweco AB  Lindab International

Weak diversification

The 3 months correlation between Sweco and Lindab is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Sweco AB and Lindab International AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lindab International and Sweco 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 Sweco AB are associated (or correlated) with Lindab International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lindab International has no effect on the direction of Sweco AB i.e., Sweco AB and Lindab International go up and down completely randomly.

Pair Corralation between Sweco AB and Lindab International

Assuming the 90 days trading horizon Sweco AB is expected to generate 0.72 times more return on investment than Lindab International. However, Sweco AB is 1.38 times less risky than Lindab International. It trades about 0.02 of its potential returns per unit of risk. Lindab International AB is currently generating about -0.07 per unit of risk. If you would invest  16,410  in Sweco AB on September 4, 2024 and sell it today you would earn a total of  290.00  from holding Sweco AB or generate 1.77% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.46%
Values	Daily Returns

Sweco AB  vs.  Lindab International AB

Sweco AB

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sweco AB are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong technical and fundamental indicators, Sweco AB is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Lindab International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lindab International AB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Sweco AB and Lindab International

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

The idea behind Sweco AB and Lindab International 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.