Correlation Between Mekonomen and Arctic Gold

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

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

Diversification Opportunities for Mekonomen and Arctic Gold

0.75

Correlation Coefficient

Mekonomen  Arctic Gold

Poor diversification

The 3 months correlation between Mekonomen and Arctic is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Mekonomen AB and Arctic Gold Publ in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arctic Gold Publ 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 Arctic Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arctic Gold Publ has no effect on the direction of Mekonomen i.e., Mekonomen and Arctic Gold go up and down completely randomly.

Pair Corralation between Mekonomen and Arctic Gold

Assuming the 90 days trading horizon Mekonomen AB is expected to generate 0.36 times more return on investment than Arctic Gold. However, Mekonomen AB is 2.76 times less risky than Arctic Gold. It trades about 0.05 of its potential returns per unit of risk. Arctic Gold Publ is currently generating about 0.01 per unit of risk. If you would invest  12,152  in Mekonomen AB on September 5, 2024 and sell it today you would earn a total of  1,388  from holding Mekonomen AB or generate 11.42% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.22%
Values	Daily Returns

Mekonomen AB  vs.  Arctic Gold Publ

Mekonomen AB

Risk-Adjusted Performance

4 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Mekonomen AB are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Mekonomen may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Arctic Gold Publ

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Arctic Gold Publ are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Arctic Gold may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Mekonomen and Arctic Gold

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

The idea behind Mekonomen AB and Arctic Gold Publ 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.