Correlation Between Fagerhult and Nepa AB

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

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

Diversification Opportunities for Fagerhult and Nepa AB

-0.41

Correlation Coefficient

Fagerhult  Nepa AB

Very good diversification

The 3 months correlation between Fagerhult and Nepa is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Fagerhult AB and Nepa AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nepa AB and Fagerhult 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 Fagerhult AB are associated (or correlated) with Nepa AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nepa AB has no effect on the direction of Fagerhult i.e., Fagerhult and Nepa AB go up and down completely randomly.

Pair Corralation between Fagerhult and Nepa AB

Assuming the 90 days trading horizon Fagerhult is expected to generate 28.63 times less return on investment than Nepa AB. But when comparing it to its historical volatility, Fagerhult AB is 1.55 times less risky than Nepa AB. It trades about 0.02 of its potential returns per unit of risk. Nepa AB is currently generating about 0.4 of returns per unit of risk over similar time horizon. If you would invest  1,845  in Nepa AB on October 25, 2024 and sell it today you would earn a total of  325.00  from holding Nepa AB or generate 17.62% return on investment over 90 days.

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

Fagerhult AB  vs.  Nepa AB

Fagerhult AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fagerhult AB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's technical and fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Nepa AB

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Nepa AB are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Nepa AB unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Fagerhult and Nepa AB

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

The idea behind Fagerhult AB and Nepa 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.