Correlation Between AB Electrolux and Husqvarna

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

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

Diversification Opportunities for AB Electrolux and Husqvarna

0.54

Correlation Coefficient

AB Electrolux  Husqvarna

Very weak diversification

The 3 months correlation between ELUX-B and Husqvarna is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding AB Electrolux and Husqvarna AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Husqvarna AB and AB Electrolux 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 AB Electrolux are associated (or correlated) with Husqvarna. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Husqvarna AB has no effect on the direction of AB Electrolux i.e., AB Electrolux and Husqvarna go up and down completely randomly.

Pair Corralation between AB Electrolux and Husqvarna

Assuming the 90 days trading horizon AB Electrolux is expected to under-perform the Husqvarna. In addition to that, AB Electrolux is 1.55 times more volatile than Husqvarna AB. It trades about -0.08 of its total potential returns per unit of risk. Husqvarna AB is currently generating about -0.03 per unit of volatility. If you would invest  6,628  in Husqvarna AB on August 31, 2024 and sell it today you would lose (314.00) from holding Husqvarna AB or give up 4.74% of portfolio value over 90 days.

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

AB Electrolux  vs.  Husqvarna AB

AB Electrolux

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AB Electrolux has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Husqvarna AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Husqvarna AB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Husqvarna is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with AB Electrolux and Husqvarna

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

The idea behind AB Electrolux and Husqvarna 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.