Correlation Between Bravida Holding and Peab AB

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

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

Diversification Opportunities for Bravida Holding and Peab AB

0.39

Correlation Coefficient

Bravida Holding  Peab AB

Weak diversification

The 3 months correlation between Bravida and Peab is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Bravida Holding AB and Peab AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Peab AB and Bravida Holding 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 Bravida Holding 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 Bravida Holding i.e., Bravida Holding and Peab AB go up and down completely randomly.

Pair Corralation between Bravida Holding and Peab AB

Assuming the 90 days trading horizon Bravida Holding AB is expected to under-perform the Peab AB. But the stock apears to be less risky and, when comparing its historical volatility, Bravida Holding AB is 1.22 times less risky than Peab AB. The stock trades about -0.04 of its potential returns per unit of risk. The Peab AB is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  7,700  in Peab AB on September 2, 2024 and sell it today you would earn a total of  315.00  from holding Peab AB or generate 4.09% return on investment over 90 days.

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

Bravida Holding AB  vs.  Peab AB

Bravida Holding AB

Risk-Adjusted Performance

0 of 100

Very Weak

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

Peab AB

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Peab AB are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Peab 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 Bravida Holding and Peab AB

The main advantage of trading using opposite Bravida Holding and Peab AB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bravida Holding 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 Bravida Holding 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.