Correlation Between ASSA ABLOY and Cavotec SA

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

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

Diversification Opportunities for ASSA ABLOY and Cavotec SA

0.46

Correlation Coefficient

ASSA ABLOY  Cavotec SA

Very weak diversification

The 3 months correlation between ASSA and Cavotec is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding ASSA ABLOY AB and Cavotec SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cavotec SA and ASSA ABLOY 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 ASSA ABLOY AB are associated (or correlated) with Cavotec SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cavotec SA has no effect on the direction of ASSA ABLOY i.e., ASSA ABLOY and Cavotec SA go up and down completely randomly.

Pair Corralation between ASSA ABLOY and Cavotec SA

Assuming the 90 days trading horizon ASSA ABLOY AB is expected to under-perform the Cavotec SA. But the stock apears to be less risky and, when comparing its historical volatility, ASSA ABLOY AB is 1.95 times less risky than Cavotec SA. The stock trades about -0.08 of its potential returns per unit of risk. The Cavotec SA is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  1,650  in Cavotec SA on December 22, 2024 and sell it today you would earn a total of  135.00  from holding Cavotec SA or generate 8.18% return on investment over 90 days.

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

ASSA ABLOY AB  vs.  Cavotec SA

ASSA ABLOY AB

Risk-Adjusted Performance

Very Weak

Over the last 90 days ASSA ABLOY AB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak 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.

Cavotec SA

Risk-Adjusted Performance

Modest

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

Pair Trading with ASSA ABLOY and Cavotec SA

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

The idea behind ASSA ABLOY AB and Cavotec SA 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.