Correlation Between H M and Rottneros

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

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

Diversification Opportunities for H M and Rottneros

0.75

Correlation Coefficient

H M  Rottneros

Poor diversification

The 3 months correlation between HM-B and Rottneros is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding H M Hennes and Rottneros AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rottneros AB and H M 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 H M Hennes are associated (or correlated) with Rottneros. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rottneros AB has no effect on the direction of H M i.e., H M and Rottneros go up and down completely randomly.

Pair Corralation between H M and Rottneros

Assuming the 90 days trading horizon H M Hennes is expected to generate 1.19 times more return on investment than Rottneros. However, H M is 1.19 times more volatile than Rottneros AB. It trades about -0.04 of its potential returns per unit of risk. Rottneros AB is currently generating about -0.09 per unit of risk. If you would invest  17,235  in H M Hennes on September 24, 2024 and sell it today you would lose (2,145) from holding H M Hennes or give up 12.45% of portfolio value over 90 days.

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

H M Hennes  vs.  Rottneros AB

H M Hennes

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days H M Hennes has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Rottneros AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rottneros 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.

Pair Trading with H M and Rottneros

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

The idea behind H M Hennes and Rottneros 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.