Correlation Between HEXPOL AB and Trelleborg

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

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

Diversification Opportunities for HEXPOL AB and Trelleborg

0.63

Correlation Coefficient

HEXPOL AB  Trelleborg

Poor diversification

The 3 months correlation between HEXPOL and Trelleborg is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding HEXPOL AB and Trelleborg AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Trelleborg AB and HEXPOL 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 HEXPOL AB are associated (or correlated) with Trelleborg. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Trelleborg AB has no effect on the direction of HEXPOL AB i.e., HEXPOL AB and Trelleborg go up and down completely randomly.

Pair Corralation between HEXPOL AB and Trelleborg

Assuming the 90 days trading horizon HEXPOL AB is expected to generate 1.08 times more return on investment than Trelleborg. However, HEXPOL AB is 1.08 times more volatile than Trelleborg AB. It trades about -0.05 of its potential returns per unit of risk. Trelleborg AB is currently generating about -0.1 per unit of risk. If you would invest  11,250  in HEXPOL AB on September 3, 2024 and sell it today you would lose (680.00) from holding HEXPOL AB or give up 6.04% of portfolio value over 90 days.

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

HEXPOL AB  vs.  Trelleborg AB

HEXPOL AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HEXPOL AB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, HEXPOL AB is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Trelleborg AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Trelleborg AB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with HEXPOL AB and Trelleborg

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

The idea behind HEXPOL AB and Trelleborg 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 Anywhere module to track or share privately all of your investments from the convenience of any device.