Correlation Between Saab AB and Swedish Orphan

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

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

Diversification Opportunities for Saab AB and Swedish Orphan

-0.85

Correlation Coefficient

Saab AB  Swedish Orphan

Pay attention - limited upside

The 3 months correlation between Saab and Swedish is -0.85. Overlapping area represents the amount of risk that can be diversified away by holding Saab AB and Swedish Orphan Biovitrum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Swedish Orphan Biovitrum and Saab 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 Saab AB are associated (or correlated) with Swedish Orphan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Swedish Orphan Biovitrum has no effect on the direction of Saab AB i.e., Saab AB and Swedish Orphan go up and down completely randomly.

Pair Corralation between Saab AB and Swedish Orphan

Assuming the 90 days trading horizon Saab AB is expected to generate 2.37 times more return on investment than Swedish Orphan. However, Saab AB is 2.37 times more volatile than Swedish Orphan Biovitrum. It trades about 0.24 of its potential returns per unit of risk. Swedish Orphan Biovitrum is currently generating about -0.08 per unit of risk. If you would invest  23,370  in Saab AB on December 30, 2024 and sell it today you would earn a total of  15,855  from holding Saab AB or generate 67.84% return on investment over 90 days.

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

Saab AB  vs.  Swedish Orphan Biovitrum

Saab AB

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Saab AB are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Saab AB sustained solid returns over the last few months and may actually be approaching a breakup point.

Swedish Orphan Biovitrum

Risk-Adjusted Performance

Very Weak

Over the last 90 days Swedish Orphan Biovitrum has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Saab AB and Swedish Orphan

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

The idea behind Saab AB and Swedish Orphan Biovitrum 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.

Check out your portfolio center.

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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.