Correlation Between Heimstaden and Tellusgruppen

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

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

Diversification Opportunities for Heimstaden and Tellusgruppen

0.21

Correlation Coefficient

Heimstaden  Tellusgruppen

Modest diversification

The 3 months correlation between Heimstaden and Tellusgruppen is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Heimstaden AB Pfd and Tellusgruppen AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tellusgruppen AB and Heimstaden 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 Heimstaden AB Pfd are associated (or correlated) with Tellusgruppen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tellusgruppen AB has no effect on the direction of Heimstaden i.e., Heimstaden and Tellusgruppen go up and down completely randomly.

Pair Corralation between Heimstaden and Tellusgruppen

Assuming the 90 days trading horizon Heimstaden AB Pfd is expected to generate 0.83 times more return on investment than Tellusgruppen. However, Heimstaden AB Pfd is 1.2 times less risky than Tellusgruppen. It trades about -0.03 of its potential returns per unit of risk. Tellusgruppen AB is currently generating about -0.1 per unit of risk. If you would invest  1,466  in Heimstaden AB Pfd on November 29, 2024 and sell it today you would lose (66.00) from holding Heimstaden AB Pfd or give up 4.5% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	87.93%
Values	Daily Returns

Heimstaden AB Pfd  vs.  Tellusgruppen AB

Heimstaden AB Pfd

Risk-Adjusted Performance

Very Weak

Over the last 90 days Heimstaden AB Pfd has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Heimstaden is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Tellusgruppen AB

Risk-Adjusted Performance

Very Weak

Over the last 90 days Tellusgruppen AB 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 essential indicators remain somewhat strong which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Heimstaden and Tellusgruppen

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

The idea behind Heimstaden AB Pfd and Tellusgruppen 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..