Correlation Between USU Software and AB SKF

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

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

Diversification Opportunities for USU Software and AB SKF

0.24

Correlation Coefficient

USU Software  AB SKF

Modest diversification

The 3 months correlation between USU and SKFA is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding USU Software AG and AB SKF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AB SKF and USU Software 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 USU Software AG are associated (or correlated) with AB SKF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AB SKF has no effect on the direction of USU Software i.e., USU Software and AB SKF go up and down completely randomly.

Pair Corralation between USU Software and AB SKF

Assuming the 90 days trading horizon USU Software is expected to generate 8.45 times less return on investment than AB SKF. But when comparing it to its historical volatility, USU Software AG is 2.17 times less risky than AB SKF. It trades about 0.02 of its potential returns per unit of risk. AB SKF is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  621.00  in AB SKF on October 10, 2024 and sell it today you would earn a total of  1,221  from holding AB SKF or generate 196.62% return on investment over 90 days.

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

USU Software AG  vs.  AB SKF

USU Software AG

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in USU Software AG are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, USU Software is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

AB SKF

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in AB SKF are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain technical and fundamental indicators, AB SKF may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with USU Software and AB SKF

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

The idea behind USU Software AG and AB SKF 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 Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.