Correlation Between Peab AB and USWE Sports

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

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

Diversification Opportunities for Peab AB and USWE Sports

0.42

Correlation Coefficient

Peab AB  USWE Sports

Very weak diversification

The 3 months correlation between Peab and USWE is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Peab AB and USWE Sports AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on USWE Sports 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 USWE Sports. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of USWE Sports AB has no effect on the direction of Peab AB i.e., Peab AB and USWE Sports go up and down completely randomly.

Pair Corralation between Peab AB and USWE Sports

Assuming the 90 days trading horizon Peab AB is expected to generate 0.79 times more return on investment than USWE Sports. However, Peab AB is 1.27 times less risky than USWE Sports. It trades about 0.0 of its potential returns per unit of risk. USWE Sports AB is currently generating about -0.01 per unit of risk. If you would invest  7,920  in Peab AB on December 30, 2024 and sell it today you would lose (120.00) from holding Peab AB or give up 1.52% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	96.83%
Values	Daily Returns

Peab AB  vs.  USWE Sports AB

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 newest stock price disturbance, may contribute to short-term losses for the investors.

USWE Sports AB

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Peab AB and USWE Sports

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

The idea behind Peab AB and USWE Sports 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.