Correlation Between Hufvudstaden and Atrium Ljungberg

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

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

Diversification Opportunities for Hufvudstaden and Atrium Ljungberg

0.16

Correlation Coefficient

Hufvudstaden  Atrium Ljungberg

Average diversification

The 3 months correlation between Hufvudstaden and Atrium is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Hufvudstaden AB and Atrium Ljungberg AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Atrium Ljungberg and Hufvudstaden 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 Hufvudstaden AB are associated (or correlated) with Atrium Ljungberg. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Atrium Ljungberg has no effect on the direction of Hufvudstaden i.e., Hufvudstaden and Atrium Ljungberg go up and down completely randomly.

Pair Corralation between Hufvudstaden and Atrium Ljungberg

Assuming the 90 days trading horizon Hufvudstaden AB is expected to generate 0.64 times more return on investment than Atrium Ljungberg. However, Hufvudstaden AB is 1.57 times less risky than Atrium Ljungberg. It trades about -0.03 of its potential returns per unit of risk. Atrium Ljungberg AB is currently generating about -0.1 per unit of risk. If you would invest  12,500  in Hufvudstaden AB on December 2, 2024 and sell it today you would lose (320.00) from holding Hufvudstaden AB or give up 2.56% of portfolio value over 90 days.

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

Hufvudstaden AB  vs.  Atrium Ljungberg AB

Hufvudstaden AB

Risk-Adjusted Performance

Very Weak

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

Atrium Ljungberg

Risk-Adjusted Performance

Very Weak

Over the last 90 days Atrium Ljungberg AB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's essential 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 Hufvudstaden and Atrium Ljungberg

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

The idea behind Hufvudstaden AB and Atrium Ljungberg 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..