Correlation Between Traton SE and AB SKF

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

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

Diversification Opportunities for Traton SE and AB SKF

0.84

Correlation Coefficient

Traton SE  AB SKF

Very poor diversification

The 3 months correlation between Traton and SKF-B is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Traton SE and AB SKF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AB SKF 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 AB SKF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AB SKF has no effect on the direction of Traton SE i.e., Traton SE and AB SKF go up and down completely randomly.

Pair Corralation between Traton SE and AB SKF

Assuming the 90 days trading horizon Traton SE is expected to generate 1.34 times more return on investment than AB SKF. However, Traton SE is 1.34 times more volatile than AB SKF. It trades about 0.07 of its potential returns per unit of risk. AB SKF is currently generating about 0.01 per unit of risk. If you would invest  31,900  in Traton SE on December 30, 2024 and sell it today you would earn a total of  2,900  from holding Traton SE or generate 9.09% return on investment over 90 days.

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

Traton SE  vs.  AB SKF

Traton SE

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Traton SE are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Traton SE may actually be approaching a critical reversion point that can send shares even higher in April 2025.

AB SKF

Risk-Adjusted Performance

Very Weak

Over the last 90 days AB SKF has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, AB SKF is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Traton SE and AB SKF

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

The idea behind Traton SE and AB SKF 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.