Correlation Between Getinge AB and AB Electrolux

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

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

Diversification Opportunities for Getinge AB and AB Electrolux

0.77

Correlation Coefficient

Getinge AB  AB Electrolux

Poor diversification

The 3 months correlation between Getinge and ELUX-B is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Getinge AB ser and AB Electrolux in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AB Electrolux and Getinge 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 Getinge AB ser are associated (or correlated) with AB Electrolux. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AB Electrolux has no effect on the direction of Getinge AB i.e., Getinge AB and AB Electrolux go up and down completely randomly.

Pair Corralation between Getinge AB and AB Electrolux

Assuming the 90 days trading horizon Getinge AB ser is expected to generate 0.72 times more return on investment than AB Electrolux. However, Getinge AB ser is 1.39 times less risky than AB Electrolux. It trades about 0.27 of its potential returns per unit of risk. AB Electrolux is currently generating about 0.16 per unit of risk. If you would invest  16,670  in Getinge AB ser on November 20, 2024 and sell it today you would earn a total of  4,505  from holding Getinge AB ser or generate 27.02% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.31%
Values	Daily Returns

Getinge AB ser  vs.  AB Electrolux

Getinge AB ser

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Getinge AB ser are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Getinge AB sustained solid returns over the last few months and may actually be approaching a breakup point.

AB Electrolux

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in AB Electrolux are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, AB Electrolux sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Getinge AB and AB Electrolux

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

The idea behind Getinge AB ser and AB Electrolux 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.