Correlation Between Afry AB and Vestum AB

Can any of the company-specific risk be diversified away by investing in both Afry AB and Vestum 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 Vestum 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 Vestum AB, you can compare the effects of market volatilities on Afry AB and Vestum 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 Vestum AB. Check out your portfolio center. Please also check ongoing floating volatility patterns of Afry AB and Vestum AB.

Diversification Opportunities for Afry AB and Vestum AB

-0.66

Correlation Coefficient

Afry AB  Vestum AB

Excellent diversification

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

Pair Corralation between Afry AB and Vestum AB

Assuming the 90 days trading horizon Afry AB is expected to generate 0.76 times more return on investment than Vestum AB. However, Afry AB is 1.32 times less risky than Vestum AB. It trades about 0.2 of its potential returns per unit of risk. Vestum AB is currently generating about -0.05 per unit of risk. If you would invest  15,370  in Afry AB on December 30, 2024 and sell it today you would earn a total of  4,130  from holding Afry AB or generate 26.87% return on investment over 90 days.

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

Afry AB  vs.  Vestum AB

Afry AB

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Afry AB are ranked lower than 15 (%) 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.

Vestum AB

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vestum AB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Afry AB and Vestum AB

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

The idea behind Afry AB and Vestum 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.