Correlation Between Traton SE and Malmbergs Elektriska

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

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

Diversification Opportunities for Traton SE and Malmbergs Elektriska

0.66

Correlation Coefficient

Traton SE  Malmbergs Elektriska

Poor diversification

The 3 months correlation between Traton and Malmbergs is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Traton SE and Malmbergs Elektriska AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Malmbergs Elektriska and Traton SE 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 Traton SE are associated (or correlated) with Malmbergs Elektriska. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Malmbergs Elektriska has no effect on the direction of Traton SE i.e., Traton SE and Malmbergs Elektriska go up and down completely randomly.

Pair Corralation between Traton SE and Malmbergs Elektriska

Assuming the 90 days trading horizon Traton SE is expected to generate 0.77 times more return on investment than Malmbergs Elektriska. However, Traton SE is 1.3 times less risky than Malmbergs Elektriska. It trades about 0.17 of its potential returns per unit of risk. Malmbergs Elektriska AB is currently generating about 0.1 per unit of risk. If you would invest  33,000  in Traton SE on November 29, 2024 and sell it today you would earn a total of  7,900  from holding Traton SE or generate 23.94% return on investment over 90 days.

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

Traton SE  vs.  Malmbergs Elektriska AB

Traton SE

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Traton SE are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Traton SE unveiled solid returns over the last few months and may actually be approaching a breakup point.

Malmbergs Elektriska

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Malmbergs Elektriska AB are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Malmbergs Elektriska sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Traton SE and Malmbergs Elektriska

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

The idea behind Traton SE and Malmbergs Elektriska 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.