Correlation Between Wallenstam and Fabege AB

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

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

Diversification Opportunities for Wallenstam and Fabege AB

0.97

Correlation Coefficient

Wallenstam  Fabege AB

Almost no diversification

The 3 months correlation between Wallenstam and Fabege is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Wallenstam AB and Fabege AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fabege AB and Wallenstam 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 Wallenstam AB are associated (or correlated) with Fabege AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fabege AB has no effect on the direction of Wallenstam i.e., Wallenstam and Fabege AB go up and down completely randomly.

Pair Corralation between Wallenstam and Fabege AB

Assuming the 90 days trading horizon Wallenstam AB is expected to generate 1.02 times more return on investment than Fabege AB. However, Wallenstam is 1.02 times more volatile than Fabege AB. It trades about -0.14 of its potential returns per unit of risk. Fabege AB is currently generating about -0.15 per unit of risk. If you would invest  5,628  in Wallenstam AB on September 13, 2024 and sell it today you would lose (752.00) from holding Wallenstam AB or give up 13.36% of portfolio value over 90 days.

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

Wallenstam AB  vs.  Fabege AB

Wallenstam AB

Risk-Adjusted Performance

0 of 100

Very Weak

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

Fabege AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fabege AB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Wallenstam and Fabege AB

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

The idea behind Wallenstam AB and Fabege 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.