Correlation Between River and Axfood AB

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

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

Diversification Opportunities for River and Axfood AB

-0.63

Correlation Coefficient

River  Axfood AB

Excellent diversification

The 3 months correlation between River and Axfood is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding River and Mercantile and Axfood AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Axfood AB and River 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 River and Mercantile are associated (or correlated) with Axfood AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Axfood AB has no effect on the direction of River i.e., River and Axfood AB go up and down completely randomly.

Pair Corralation between River and Axfood AB

Assuming the 90 days trading horizon River and Mercantile is expected to under-perform the Axfood AB. But the stock apears to be less risky and, when comparing its historical volatility, River and Mercantile is 1.28 times less risky than Axfood AB. The stock trades about -0.14 of its potential returns per unit of risk. The Axfood AB is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  23,300  in Axfood AB on October 21, 2024 and sell it today you would lose (135.00) from holding Axfood AB or give up 0.58% of portfolio value over 90 days.

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

River and Mercantile  vs.  Axfood AB

River and Mercantile

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in River and Mercantile are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, River is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Axfood AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Axfood AB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with River and Axfood AB

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

The idea behind River and Mercantile and Axfood 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.