Correlation Between Axfood AB and Castellum

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

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

Diversification Opportunities for Axfood AB and Castellum

0.5

Correlation Coefficient

Axfood AB  Castellum

Very weak diversification

The 3 months correlation between Axfood and Castellum is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Axfood AB and Castellum AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Castellum AB and Axfood 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 Axfood AB are associated (or correlated) with Castellum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Castellum AB has no effect on the direction of Axfood AB i.e., Axfood AB and Castellum go up and down completely randomly.

Pair Corralation between Axfood AB and Castellum

Assuming the 90 days trading horizon Axfood AB is expected to generate 0.79 times more return on investment than Castellum. However, Axfood AB is 1.26 times less risky than Castellum. It trades about -0.01 of its potential returns per unit of risk. Castellum AB is currently generating about -0.09 per unit of risk. If you would invest  23,370  in Axfood AB on November 29, 2024 and sell it today you would lose (220.00) from holding Axfood AB or give up 0.94% of portfolio value over 90 days.

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

Axfood AB  vs.  Castellum AB

Axfood AB

Risk-Adjusted Performance

Very Weak

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

Castellum AB

Risk-Adjusted Performance

Very Weak

Over the last 90 days Castellum AB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Axfood AB and Castellum

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

The idea behind Axfood AB and Castellum 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.