Correlation Between Nyfosa AB and Hufvudstaden

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

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

Diversification Opportunities for Nyfosa AB and Hufvudstaden

0.81

Correlation Coefficient

Nyfosa AB  Hufvudstaden

Very poor diversification

The 3 months correlation between Nyfosa and Hufvudstaden is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Nyfosa AB and Hufvudstaden AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hufvudstaden AB and Nyfosa AB 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 Nyfosa AB are associated (or correlated) with Hufvudstaden. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hufvudstaden AB has no effect on the direction of Nyfosa AB i.e., Nyfosa AB and Hufvudstaden go up and down completely randomly.

Pair Corralation between Nyfosa AB and Hufvudstaden

Assuming the 90 days trading horizon Nyfosa AB is expected to generate 1.43 times more return on investment than Hufvudstaden. However, Nyfosa AB is 1.43 times more volatile than Hufvudstaden AB. It trades about 0.03 of its potential returns per unit of risk. Hufvudstaden AB is currently generating about 0.01 per unit of risk. If you would invest  10,800  in Nyfosa AB on September 4, 2024 and sell it today you would earn a total of  100.00  from holding Nyfosa AB or generate 0.93% return on investment over 90 days.

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

Nyfosa AB  vs.  Hufvudstaden AB

Nyfosa AB

Risk-Adjusted Performance

0 of 100

Very Weak

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

Hufvudstaden AB

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Nyfosa AB and Hufvudstaden

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

The idea behind Nyfosa AB and Hufvudstaden 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.