Correlation Between Husqvarna and Makita

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

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

Diversification Opportunities for Husqvarna and Makita

0.0

Correlation Coefficient

Husqvarna  Makita

Pay attention - limited upside

The 3 months correlation between Husqvarna and Makita is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Husqvarna AB and Makita in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Makita and Husqvarna 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 Husqvarna AB are associated (or correlated) with Makita. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Makita has no effect on the direction of Husqvarna i.e., Husqvarna and Makita go up and down completely randomly.

Pair Corralation between Husqvarna and Makita

If you would invest (100.00) in Makita on December 30, 2024 and sell it today you would earn a total of  100.00  from holding Makita or generate -100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Husqvarna AB  vs.  Makita

Husqvarna AB

Risk-Adjusted Performance

Very Weak

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

Makita

Risk-Adjusted Performance

Very Weak

Over the last 90 days Makita has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Makita is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Husqvarna and Makita

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

The idea behind Husqvarna AB and Makita 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.