Correlation Between Hanza AB and Generic Sweden

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

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

Diversification Opportunities for Hanza AB and Generic Sweden

-0.08

Correlation Coefficient

Hanza AB  Generic Sweden

Good diversification

The 3 months correlation between Hanza and Generic is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Hanza AB and Generic Sweden publ in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Generic Sweden publ and Hanza 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 Hanza AB are associated (or correlated) with Generic Sweden. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Generic Sweden publ has no effect on the direction of Hanza AB i.e., Hanza AB and Generic Sweden go up and down completely randomly.

Pair Corralation between Hanza AB and Generic Sweden

Assuming the 90 days trading horizon Hanza AB is expected to under-perform the Generic Sweden. But the stock apears to be less risky and, when comparing its historical volatility, Hanza AB is 1.04 times less risky than Generic Sweden. The stock trades about -0.05 of its potential returns per unit of risk. The Generic Sweden publ is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  5,580  in Generic Sweden publ on December 31, 2024 and sell it today you would earn a total of  300.00  from holding Generic Sweden publ or generate 5.38% return on investment over 90 days.

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

Hanza AB  vs.  Generic Sweden publ

Hanza AB

Risk-Adjusted Performance

Very Weak

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

Generic Sweden publ

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Generic Sweden publ are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Generic Sweden may actually be approaching a critical reversion point that can send shares even higher in May 2025.

Pair Trading with Hanza AB and Generic Sweden

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

The idea behind Hanza AB and Generic Sweden publ 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.