Correlation Between Mekonomen and AddLife AB

Can any of the company-specific risk be diversified away by investing in both Mekonomen and AddLife 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 AddLife 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 AddLife AB, you can compare the effects of market volatilities on Mekonomen and AddLife 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 AddLife AB. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mekonomen and AddLife AB.

Diversification Opportunities for Mekonomen and AddLife AB

0.48

Correlation Coefficient

Mekonomen  AddLife AB

Very weak diversification

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

Pair Corralation between Mekonomen and AddLife AB

Assuming the 90 days trading horizon Mekonomen AB is expected to under-perform the AddLife AB. But the stock apears to be less risky and, when comparing its historical volatility, Mekonomen AB is 1.24 times less risky than AddLife AB. The stock trades about -0.04 of its potential returns per unit of risk. The AddLife AB is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  14,210  in AddLife AB on October 23, 2024 and sell it today you would lose (300.00) from holding AddLife AB or give up 2.11% 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.  AddLife 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.

AddLife AB

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Mekonomen and AddLife AB

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

The idea behind Mekonomen AB and AddLife 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.