Correlation Between Avanza Bank and SkiStar AB

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

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

Diversification Opportunities for Avanza Bank and SkiStar AB

0.56

Correlation Coefficient

Avanza Bank  SkiStar AB

Very weak diversification

The 3 months correlation between Avanza and SkiStar is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Avanza Bank Holding and SkiStar AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SkiStar AB and Avanza Bank 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 Avanza Bank Holding are associated (or correlated) with SkiStar AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SkiStar AB has no effect on the direction of Avanza Bank i.e., Avanza Bank and SkiStar AB go up and down completely randomly.

Pair Corralation between Avanza Bank and SkiStar AB

Assuming the 90 days trading horizon Avanza Bank Holding is expected to generate 1.8 times more return on investment than SkiStar AB. However, Avanza Bank is 1.8 times more volatile than SkiStar AB. It trades about 0.17 of its potential returns per unit of risk. SkiStar AB is currently generating about 0.04 per unit of risk. If you would invest  27,440  in Avanza Bank Holding on December 2, 2024 and sell it today you would earn a total of  4,760  from holding Avanza Bank Holding or generate 17.35% return on investment over 90 days.

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

Avanza Bank Holding  vs.  SkiStar AB

Avanza Bank Holding

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Avanza Bank Holding are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Avanza Bank unveiled solid returns over the last few months and may actually be approaching a breakup point.

SkiStar AB

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in SkiStar AB are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong forward indicators, SkiStar AB is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Avanza Bank and SkiStar AB

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

The idea behind Avanza Bank Holding and SkiStar 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.