Correlation Between Mohawk Industries and SEB SA

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

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

Diversification Opportunities for Mohawk Industries and SEB SA

-0.45

Correlation Coefficient

Mohawk Industries  SEB SA

Very good diversification

The 3 months correlation between Mohawk and SEB is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Mohawk Industries and SEB SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SEB SA and Mohawk Industries 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 Mohawk Industries are associated (or correlated) with SEB SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SEB SA has no effect on the direction of Mohawk Industries i.e., Mohawk Industries and SEB SA go up and down completely randomly.

Pair Corralation between Mohawk Industries and SEB SA

Considering the 90-day investment horizon Mohawk Industries is expected to under-perform the SEB SA. In addition to that, Mohawk Industries is 1.15 times more volatile than SEB SA. It trades about -0.01 of its total potential returns per unit of risk. SEB SA is currently generating about 0.11 per unit of volatility. If you would invest  8,620  in SEB SA on December 27, 2024 and sell it today you would earn a total of  618.00  from holding SEB SA or generate 7.17% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	70.0%
Values	Daily Returns

Mohawk Industries  vs.  SEB SA

Mohawk Industries

Risk-Adjusted Performance

Very Weak

Over the last 90 days Mohawk Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent technical indicators, Mohawk Industries is not utilizing all of its potentials. The newest stock price mess, may contribute to short-term losses for the institutional investors.

SEB SA

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in SEB SA are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly conflicting basic indicators, SEB SA may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Mohawk Industries and SEB SA

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

The idea behind Mohawk Industries and SEB SA 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.