Correlation Between Boliden AB and Bravida Holding

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

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

Diversification Opportunities for Boliden AB and Bravida Holding

0.9

Correlation Coefficient

Boliden AB  Bravida Holding

Almost no diversification

The 3 months correlation between Boliden and Bravida is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Boliden AB and Bravida Holding AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bravida Holding 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 Bravida Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bravida Holding AB has no effect on the direction of Boliden AB i.e., Boliden AB and Bravida Holding go up and down completely randomly.

Pair Corralation between Boliden AB and Bravida Holding

Assuming the 90 days trading horizon Boliden AB is expected to generate 2.05 times more return on investment than Bravida Holding. However, Boliden AB is 2.05 times more volatile than Bravida Holding AB. It trades about 0.18 of its potential returns per unit of risk. Bravida Holding AB is currently generating about 0.27 per unit of risk. If you would invest  31,650  in Boliden AB on December 2, 2024 and sell it today you would earn a total of  5,950  from holding Boliden AB or generate 18.8% return on investment over 90 days.

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

Boliden AB  vs.  Bravida Holding AB

Boliden AB

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Boliden AB are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain essential indicators, Boliden AB unveiled solid returns over the last few months and may actually be approaching a breakup point.

Bravida Holding AB

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Bravida Holding AB are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Bravida Holding unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Boliden AB and Bravida Holding

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

The idea behind Boliden AB and Bravida Holding 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.