Correlation Between Husqvarna and BillerudKorsnas

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

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

Diversification Opportunities for Husqvarna and BillerudKorsnas

-0.7

Correlation Coefficient

Husqvarna  BillerudKorsnas

Excellent diversification

The 3 months correlation between Husqvarna and BillerudKorsnas is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Husqvarna AB and BillerudKorsnas AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BillerudKorsnas AB 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 BillerudKorsnas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BillerudKorsnas AB has no effect on the direction of Husqvarna i.e., Husqvarna and BillerudKorsnas go up and down completely randomly.

Pair Corralation between Husqvarna and BillerudKorsnas

Assuming the 90 days trading horizon Husqvarna AB is expected to under-perform the BillerudKorsnas. In addition to that, Husqvarna is 1.57 times more volatile than BillerudKorsnas AB. It trades about -0.1 of its total potential returns per unit of risk. BillerudKorsnas AB is currently generating about 0.32 per unit of volatility. If you would invest  9,560  in BillerudKorsnas AB on November 29, 2024 and sell it today you would earn a total of  2,400  from holding BillerudKorsnas AB or generate 25.1% return on investment over 90 days.

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

Husqvarna AB  vs.  BillerudKorsnas AB

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. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

BillerudKorsnas AB

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in BillerudKorsnas AB are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, BillerudKorsnas unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Husqvarna and BillerudKorsnas

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

The idea behind Husqvarna AB and BillerudKorsnas 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.