Correlation Between Bilia AB and Peab AB

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

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

Diversification Opportunities for Bilia AB and Peab AB

0.62

Correlation Coefficient

Bilia AB  Peab AB

Poor diversification

The 3 months correlation between Bilia and Peab is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Bilia AB and Peab AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Peab AB and Bilia 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 Bilia AB are associated (or correlated) with Peab AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Peab AB has no effect on the direction of Bilia AB i.e., Bilia AB and Peab AB go up and down completely randomly.

Pair Corralation between Bilia AB and Peab AB

Assuming the 90 days trading horizon Bilia AB is expected to generate 1.32 times less return on investment than Peab AB. But when comparing it to its historical volatility, Bilia AB is 1.09 times less risky than Peab AB. It trades about 0.07 of its potential returns per unit of risk. Peab AB is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  7,500  in Peab AB on September 12, 2024 and sell it today you would earn a total of  680.00  from holding Peab AB or generate 9.07% return on investment over 90 days.

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

Bilia AB  vs.  Peab AB

Bilia AB

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Bilia AB are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain essential indicators, Bilia AB may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Peab AB

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Peab AB are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Peab AB may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Bilia AB and Peab AB

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

The idea behind Bilia AB and Peab 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.