Correlation Between Alfa Laval and Nederman Holding

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

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

Diversification Opportunities for Alfa Laval and Nederman Holding

0.35

Correlation Coefficient

Alfa Laval  Nederman Holding

Weak diversification

The 3 months correlation between Alfa and Nederman is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Alfa Laval AB and Nederman Holding AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nederman Holding and Alfa Laval 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 Alfa Laval AB are associated (or correlated) with Nederman Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nederman Holding has no effect on the direction of Alfa Laval i.e., Alfa Laval and Nederman Holding go up and down completely randomly.

Pair Corralation between Alfa Laval and Nederman Holding

Assuming the 90 days trading horizon Alfa Laval AB is expected to under-perform the Nederman Holding. But the stock apears to be less risky and, when comparing its historical volatility, Alfa Laval AB is 1.44 times less risky than Nederman Holding. The stock trades about -0.2 of its potential returns per unit of risk. The Nederman Holding AB is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  21,500  in Nederman Holding AB on October 9, 2024 and sell it today you would lose (150.00) from holding Nederman Holding AB or give up 0.7% of portfolio value over 90 days.

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

Alfa Laval AB  vs.  Nederman Holding AB

Alfa Laval AB

Risk-Adjusted Performance

0 of 100

Very Weak

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

Nederman Holding

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nederman Holding AB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Nederman Holding 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 Alfa Laval and Nederman Holding

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

The idea behind Alfa Laval AB and Nederman Holding 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.