Correlation Between Hanza AB and Malmbergs Elektriska

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

By analyzing existing cross correlation between Hanza AB and Malmbergs Elektriska AB, you can compare the effects of market volatilities on Hanza AB and Malmbergs Elektriska 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 Malmbergs Elektriska. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hanza AB and Malmbergs Elektriska.

Diversification Opportunities for Hanza AB and Malmbergs Elektriska

0.38

Correlation Coefficient

Hanza AB  Malmbergs Elektriska

Weak diversification

The 3 months correlation between Hanza and Malmbergs is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Hanza AB and Malmbergs Elektriska AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Malmbergs Elektriska 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 Malmbergs Elektriska. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Malmbergs Elektriska has no effect on the direction of Hanza AB i.e., Hanza AB and Malmbergs Elektriska go up and down completely randomly.

Pair Corralation between Hanza AB and Malmbergs Elektriska

Assuming the 90 days trading horizon Hanza AB is expected to generate 2.58 times less return on investment than Malmbergs Elektriska. But when comparing it to its historical volatility, Hanza AB is 2.36 times less risky than Malmbergs Elektriska. It trades about 0.16 of its potential returns per unit of risk. Malmbergs Elektriska AB is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  4,110  in Malmbergs Elektriska AB on November 29, 2024 and sell it today you would earn a total of  620.00  from holding Malmbergs Elektriska AB or generate 15.09% return on investment over 90 days.

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

Hanza AB  vs.  Malmbergs Elektriska AB

Hanza AB

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Hanza AB are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Hanza AB unveiled solid returns over the last few months and may actually be approaching a breakup point.

Malmbergs Elektriska

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Malmbergs Elektriska AB are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Malmbergs Elektriska sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hanza AB and Malmbergs Elektriska

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

The idea behind Hanza AB and Malmbergs Elektriska 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.

Check out your portfolio center.

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.