Correlation Between Axfood AB and Target Corp

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

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

Diversification Opportunities for Axfood AB and Target Corp

0.64

Correlation Coefficient

Axfood AB  Target Corp

Poor diversification

The 3 months correlation between Axfood and Target is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Axfood AB and Target Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Target Corp and Axfood 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 Axfood AB are associated (or correlated) with Target Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Target Corp has no effect on the direction of Axfood AB i.e., Axfood AB and Target Corp go up and down completely randomly.

Pair Corralation between Axfood AB and Target Corp

Assuming the 90 days trading horizon Axfood AB is expected to under-perform the Target Corp. But the stock apears to be less risky and, when comparing its historical volatility, Axfood AB is 2.53 times less risky than Target Corp. The stock trades about -0.01 of its potential returns per unit of risk. The Target Corp is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  12,496  in Target Corp on September 23, 2024 and sell it today you would earn a total of  640.00  from holding Target Corp or generate 5.12% return on investment over 90 days.

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

Axfood AB  vs.  Target Corp

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. In spite of unsteady 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.

Target Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Target Corp 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 Axfood AB and Target Corp

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

The idea behind Axfood AB and Target Corp 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.