Correlation Between Afry AB and Sweco AB

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

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

Diversification Opportunities for Afry AB and Sweco AB

0.91

Correlation Coefficient

Afry AB  Sweco AB

Almost no diversification

The 3 months correlation between Afry and Sweco is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Afry AB and Sweco AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sweco AB and Afry 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 Afry AB are associated (or correlated) with Sweco AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sweco AB has no effect on the direction of Afry AB i.e., Afry AB and Sweco AB go up and down completely randomly.

Pair Corralation between Afry AB and Sweco AB

Assuming the 90 days trading horizon Afry AB is expected to generate 1.18 times more return on investment than Sweco AB. However, Afry AB is 1.18 times more volatile than Sweco AB. It trades about 0.21 of its potential returns per unit of risk. Sweco AB is currently generating about 0.23 per unit of risk. If you would invest  17,480  in Afry AB on November 29, 2024 and sell it today you would earn a total of  1,930  from holding Afry AB or generate 11.04% return on investment over 90 days.

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

Afry AB  vs.  Sweco AB

Afry AB

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Afry AB are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Afry AB unveiled solid returns over the last few months and may actually be approaching a breakup point.

Sweco AB

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sweco AB are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain technical and fundamental indicators, Sweco AB sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Afry AB and Sweco AB

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

The idea behind Afry AB and Sweco 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.