Correlation Between Mekonomen and Afry AB

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

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

Diversification Opportunities for Mekonomen and Afry AB

0.4

Correlation Coefficient

Mekonomen  Afry AB

Very weak diversification

The 3 months correlation between Mekonomen and Afry is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Mekonomen AB and Afry AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Afry AB and Mekonomen 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 Mekonomen AB are associated (or correlated) with Afry AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Afry AB has no effect on the direction of Mekonomen i.e., Mekonomen and Afry AB go up and down completely randomly.

Pair Corralation between Mekonomen and Afry AB

Assuming the 90 days trading horizon Mekonomen AB is expected to generate 1.28 times more return on investment than Afry AB. However, Mekonomen is 1.28 times more volatile than Afry AB. It trades about -0.03 of its potential returns per unit of risk. Afry AB is currently generating about -0.09 per unit of risk. If you would invest  13,540  in Mekonomen AB on October 8, 2024 and sell it today you would lose (140.00) from holding Mekonomen AB or give up 1.03% of portfolio value over 90 days.

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

Mekonomen AB  vs.  Afry AB

Mekonomen AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mekonomen AB has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Afry AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Afry AB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Mekonomen and Afry AB

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

The idea behind Mekonomen AB and Afry 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.