Correlation Between NIBE Industrier and Alfa Laval

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

By analyzing existing cross correlation between NIBE Industrier AB and Alfa Laval AB, you can compare the effects of market volatilities on NIBE Industrier and Alfa Laval 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 NIBE Industrier with a short position of Alfa Laval. Check out your portfolio center. Please also check ongoing floating volatility patterns of NIBE Industrier and Alfa Laval.

Diversification Opportunities for NIBE Industrier and Alfa Laval

0.36

Correlation Coefficient

NIBE Industrier  Alfa Laval

Weak diversification

The 3 months correlation between NIBE and Alfa is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding NIBE Industrier AB and Alfa Laval AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alfa Laval AB and NIBE Industrier 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 NIBE Industrier AB are associated (or correlated) with Alfa Laval. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alfa Laval AB has no effect on the direction of NIBE Industrier i.e., NIBE Industrier and Alfa Laval go up and down completely randomly.

Pair Corralation between NIBE Industrier and Alfa Laval

Assuming the 90 days trading horizon NIBE Industrier AB is expected to under-perform the Alfa Laval. In addition to that, NIBE Industrier is 1.89 times more volatile than Alfa Laval AB. It trades about -0.14 of its total potential returns per unit of risk. Alfa Laval AB is currently generating about -0.07 per unit of volatility. If you would invest  47,540  in Alfa Laval AB on September 23, 2024 and sell it today you would lose (990.00) from holding Alfa Laval AB or give up 2.08% of portfolio value over 90 days.

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

NIBE Industrier AB  vs.  Alfa Laval AB

NIBE Industrier AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NIBE Industrier AB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's fundamental drivers remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Alfa Laval AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alfa Laval AB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Alfa Laval is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with NIBE Industrier and Alfa Laval

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

The idea behind NIBE Industrier AB and Alfa Laval 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.

Check out your portfolio center.

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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.