Correlation Between Oatly Group and SM Investments

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

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

Diversification Opportunities for Oatly Group and SM Investments

-0.2

Correlation Coefficient

Oatly Group  SM Investments

Good diversification

The 3 months correlation between Oatly and SVTMF is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Oatly Group AB and SM Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SM Investments and Oatly Group 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 Oatly Group AB are associated (or correlated) with SM Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SM Investments has no effect on the direction of Oatly Group i.e., Oatly Group and SM Investments go up and down completely randomly.

Pair Corralation between Oatly Group and SM Investments

Given the investment horizon of 90 days Oatly Group AB is expected to generate 2.75 times more return on investment than SM Investments. However, Oatly Group is 2.75 times more volatile than SM Investments. It trades about 0.16 of its potential returns per unit of risk. SM Investments is currently generating about -0.24 per unit of risk. If you would invest  61.00  in Oatly Group AB on October 25, 2024 and sell it today you would earn a total of  7.00  from holding Oatly Group AB or generate 11.48% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	94.74%
Values	Daily Returns

Oatly Group AB  vs.  SM Investments

Oatly Group AB

Risk-Adjusted Performance

0 of 100

Very Weak

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

SM Investments

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SM Investments has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable primary indicators, SM Investments is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Oatly Group and SM Investments

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

The idea behind Oatly Group AB and SM Investments 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.