Correlation Between Hufvudstaden and Fastighets

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

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

Diversification Opportunities for Hufvudstaden and Fastighets

0.66

Correlation Coefficient

Hufvudstaden  Fastighets

Poor diversification

The 3 months correlation between Hufvudstaden and Fastighets is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Hufvudstaden AB and Fastighets AB Balder in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fastighets AB Balder 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 Fastighets. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fastighets AB Balder has no effect on the direction of Hufvudstaden i.e., Hufvudstaden and Fastighets go up and down completely randomly.

Pair Corralation between Hufvudstaden and Fastighets

Assuming the 90 days trading horizon Hufvudstaden AB is expected to under-perform the Fastighets. But the stock apears to be less risky and, when comparing its historical volatility, Hufvudstaden AB is 1.61 times less risky than Fastighets. The stock trades about -0.07 of its potential returns per unit of risk. The Fastighets AB Balder is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  7,956  in Fastighets AB Balder on September 3, 2024 and sell it today you would earn a total of  436.00  from holding Fastighets AB Balder or generate 5.48% return on investment over 90 days.

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

Hufvudstaden AB  vs.  Fastighets AB Balder

Hufvudstaden AB

Risk-Adjusted Performance

0 of 100

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.

Fastighets AB Balder

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Fastighets AB Balder are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong essential indicators, Fastighets is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Hufvudstaden and Fastighets

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

The idea behind Hufvudstaden AB and Fastighets AB Balder 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.