Correlation Between Humble Group and Mekonomen

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

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

Diversification Opportunities for Humble Group and Mekonomen

0.48

Correlation Coefficient

Humble Group  Mekonomen

Very weak diversification

The 3 months correlation between Humble and Mekonomen is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Humble Group AB and Mekonomen AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mekonomen AB and Humble Group 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 Humble Group AB are associated (or correlated) with Mekonomen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mekonomen AB has no effect on the direction of Humble Group i.e., Humble Group and Mekonomen go up and down completely randomly.

Pair Corralation between Humble Group and Mekonomen

Assuming the 90 days trading horizon Humble Group AB is expected to generate 2.61 times more return on investment than Mekonomen. However, Humble Group is 2.61 times more volatile than Mekonomen AB. It trades about 0.3 of its potential returns per unit of risk. Mekonomen AB is currently generating about 0.38 per unit of risk. If you would invest  1,000.00  in Humble Group AB on September 21, 2024 and sell it today you would earn a total of  230.00  from holding Humble Group AB or generate 23.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.65%
Values	Daily Returns

Humble Group AB  vs.  Mekonomen AB

Humble Group AB

Risk-Adjusted Performance

0 of 100

Very Weak

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

Mekonomen AB

Risk-Adjusted Performance

1 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Mekonomen AB are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Mekonomen is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Humble Group and Mekonomen

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

The idea behind Humble Group AB and Mekonomen 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.

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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.