Correlation Between Investor and Sweco AB

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

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

Diversification Opportunities for Investor and Sweco AB

0.8

Correlation Coefficient

Investor  Sweco AB

Very poor diversification

The 3 months correlation between Investor and Sweco is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Investor AB ser and Sweco AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sweco AB and Investor 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 Investor AB ser are associated (or correlated) with Sweco AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sweco AB has no effect on the direction of Investor i.e., Investor and Sweco AB go up and down completely randomly.

Pair Corralation between Investor and Sweco AB

Assuming the 90 days trading horizon Investor is expected to generate 1.93 times less return on investment than Sweco AB. But when comparing it to its historical volatility, Investor AB ser is 1.71 times less risky than Sweco AB. It trades about 0.1 of its potential returns per unit of risk. Sweco AB is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  16,550  in Sweco AB on December 1, 2024 and sell it today you would earn a total of  1,850  from holding Sweco AB or generate 11.18% return on investment over 90 days.

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

Investor AB ser  vs.  Sweco AB

Investor AB ser

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Investor AB ser are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Investor may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Sweco AB

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sweco AB are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical and fundamental indicators, Sweco AB may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Investor and Sweco AB

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

The idea behind Investor AB ser and Sweco 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.