Correlation Between Boliden AB and Alfa Laval

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

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

Diversification Opportunities for Boliden AB and Alfa Laval

-0.2

Correlation Coefficient

Boliden AB  Alfa Laval

Good diversification

The 3 months correlation between Boliden and Alfa is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Boliden AB and Alfa Laval AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alfa Laval AB and Boliden 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 Boliden AB are associated (or correlated) with Alfa Laval. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alfa Laval AB has no effect on the direction of Boliden AB i.e., Boliden AB and Alfa Laval go up and down completely randomly.

Pair Corralation between Boliden AB and Alfa Laval

Assuming the 90 days trading horizon Boliden AB is expected to generate 1.78 times more return on investment than Alfa Laval. However, Boliden AB is 1.78 times more volatile than Alfa Laval AB. It trades about 0.07 of its potential returns per unit of risk. Alfa Laval AB is currently generating about -0.05 per unit of risk. If you would invest  31,050  in Boliden AB on December 30, 2024 and sell it today you would earn a total of  2,880  from holding Boliden AB or generate 9.28% return on investment over 90 days.

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

Boliden AB  vs.  Alfa Laval AB

Boliden AB

Risk-Adjusted Performance

Modest

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

Alfa Laval AB

Risk-Adjusted Performance

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 newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Boliden AB and Alfa Laval

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

The idea behind Boliden AB and Alfa Laval 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.