Correlation Between Mekonomen and AXichem AB

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

Diversification Opportunities for Mekonomen and AXichem AB

0.33

Correlation Coefficient

Mekonomen  AXichem AB

Weak diversification

The 3 months correlation between Mekonomen and AXichem is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Mekonomen AB and aXichem AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on aXichem 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 AXichem AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of aXichem AB has no effect on the direction of Mekonomen i.e., Mekonomen and AXichem AB go up and down completely randomly.

Pair Corralation between Mekonomen and AXichem AB

Assuming the 90 days trading horizon Mekonomen is expected to generate 4.66 times less return on investment than AXichem AB. But when comparing it to its historical volatility, Mekonomen AB is 4.09 times less risky than AXichem AB. It trades about 0.03 of its potential returns per unit of risk. aXichem AB is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  142.00  in aXichem AB on September 4, 2024 and sell it today you would earn a total of  2.00  from holding aXichem AB or generate 1.41% return on investment over 90 days.

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

Mekonomen AB  vs.  aXichem AB

Mekonomen AB

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Mekonomen AB are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. 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.

aXichem AB

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in aXichem AB are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak forward indicators, AXichem AB sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Mekonomen and AXichem AB

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

The idea behind Mekonomen AB and aXichem 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.