Correlation Between Peab AB and Bravida Holding

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

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

Diversification Opportunities for Peab AB and Bravida Holding

0.56

Correlation Coefficient

Peab AB  Bravida Holding

Very weak diversification

The 3 months correlation between Peab and Bravida is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Peab AB and Bravida Holding AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bravida Holding AB and Peab 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 Peab AB are associated (or correlated) with Bravida Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bravida Holding AB has no effect on the direction of Peab AB i.e., Peab AB and Bravida Holding go up and down completely randomly.

Pair Corralation between Peab AB and Bravida Holding

Assuming the 90 days trading horizon Peab AB is expected to generate 1.25 times more return on investment than Bravida Holding. However, Peab AB is 1.25 times more volatile than Bravida Holding AB. It trades about 0.09 of its potential returns per unit of risk. Bravida Holding AB is currently generating about 0.07 per unit of risk. If you would invest  7,500  in Peab AB on September 12, 2024 and sell it today you would earn a total of  680.00  from holding Peab AB or generate 9.07% return on investment over 90 days.

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

Peab AB  vs.  Bravida Holding AB

Peab AB

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Peab AB are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Peab AB may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Bravida Holding AB

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Bravida Holding AB are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Bravida Holding may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Peab AB and Bravida Holding

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

The idea behind Peab AB and Bravida Holding 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.