Correlation Between Sweco AB and Vestum AB

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

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

Diversification Opportunities for Sweco AB and Vestum AB

0.37

Correlation Coefficient

Sweco AB  Vestum AB

Weak diversification

The 3 months correlation between Sweco and Vestum is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Sweco AB and Vestum AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vestum AB 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 Vestum AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vestum AB has no effect on the direction of Sweco AB i.e., Sweco AB and Vestum AB go up and down completely randomly.

Pair Corralation between Sweco AB and Vestum AB

Assuming the 90 days trading horizon Sweco AB is expected to under-perform the Vestum AB. But the stock apears to be less risky and, when comparing its historical volatility, Sweco AB is 1.4 times less risky than Vestum AB. The stock trades about -0.03 of its potential returns per unit of risk. The Vestum AB is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  951.00  in Vestum AB on August 31, 2024 and sell it today you would earn a total of  59.00  from holding Vestum AB or generate 6.2% 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.  Vestum AB

Sweco AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sweco AB has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Vestum AB

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Vestum AB are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Vestum AB may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Sweco AB and Vestum AB

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

The idea behind Sweco AB and Vestum 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.