Correlation Between Peab AB and Online Brands

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

By analyzing existing cross correlation between Peab AB and Online Brands Nordic, you can compare the effects of market volatilities on Peab AB and Online Brands 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 Online Brands. Check out your portfolio center. Please also check ongoing floating volatility patterns of Peab AB and Online Brands.

Diversification Opportunities for Peab AB and Online Brands

0.02

Correlation Coefficient

Peab AB  Online Brands

Significant diversification

The 3 months correlation between Peab and Online is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Peab AB and Online Brands Nordic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Online Brands Nordic 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 Online Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Online Brands Nordic has no effect on the direction of Peab AB i.e., Peab AB and Online Brands go up and down completely randomly.

Pair Corralation between Peab AB and Online Brands

Assuming the 90 days trading horizon Peab AB is expected to under-perform the Online Brands. But the stock apears to be less risky and, when comparing its historical volatility, Peab AB is 1.63 times less risky than Online Brands. The stock trades about -0.01 of its potential returns per unit of risk. The Online Brands Nordic is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  1,130  in Online Brands Nordic on December 3, 2024 and sell it today you would earn a total of  385.00  from holding Online Brands Nordic or generate 34.07% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

Peab AB  vs.  Online Brands Nordic

Peab AB

Risk-Adjusted Performance

Very Weak

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

Online Brands Nordic

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Online Brands Nordic are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Online Brands unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Peab AB and Online Brands

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

The idea behind Peab AB and Online Brands Nordic 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 Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .