Correlation Between Mekonomen and Humble Group

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

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

Diversification Opportunities for Mekonomen and Humble Group

0.49

Correlation Coefficient

Mekonomen  Humble Group

Very weak diversification

The 3 months correlation between Mekonomen and Humble is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Mekonomen AB and Humble Group AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Humble Group 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 Humble Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Humble Group AB has no effect on the direction of Mekonomen i.e., Mekonomen and Humble Group go up and down completely randomly.

Pair Corralation between Mekonomen and Humble Group

Assuming the 90 days trading horizon Mekonomen is expected to generate 2.09 times less return on investment than Humble Group. But when comparing it to its historical volatility, Mekonomen AB is 2.61 times less risky than Humble Group. It trades about 0.38 of its potential returns per unit of risk. Humble Group AB is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest  1,000.00  in Humble Group AB on September 21, 2024 and sell it today you would earn a total of  230.00  from holding Humble Group AB or generate 23.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.65%
Values	Daily Returns

Mekonomen AB  vs.  Humble Group AB

Mekonomen AB

Risk-Adjusted Performance

1 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Mekonomen AB are ranked lower than 1 (%) 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.

Humble Group AB

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Mekonomen and Humble Group

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

The idea behind Mekonomen AB and Humble Group 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.