Correlation Between JM AB and AB SKF

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

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

Diversification Opportunities for JM AB and AB SKF

-0.1

Correlation Coefficient

JM AB  AB SKF

Good diversification

The 3 months correlation between JM AB and SKF-B is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding JM AB and AB SKF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AB SKF and JM AB 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 JM AB are associated (or correlated) with AB SKF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AB SKF has no effect on the direction of JM AB i.e., JM AB and AB SKF go up and down completely randomly.

Pair Corralation between JM AB and AB SKF

Assuming the 90 days horizon JM AB is expected to under-perform the AB SKF. In addition to that, JM AB is 1.37 times more volatile than AB SKF. It trades about -0.11 of its total potential returns per unit of risk. AB SKF is currently generating about 0.09 per unit of volatility. If you would invest  21,500  in AB SKF on December 1, 2024 and sell it today you would earn a total of  1,680  from holding AB SKF or generate 7.81% return on investment over 90 days.

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

JM AB  vs.  AB SKF

JM AB

Risk-Adjusted Performance

Very Weak

Over the last 90 days JM AB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

AB SKF

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in AB SKF are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, AB SKF may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with JM AB and AB SKF

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

The idea behind JM AB and AB SKF 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.