Correlation Between Scandinavian Brake and Tryg AS

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

By analyzing existing cross correlation between Scandinavian Brake Systems and Tryg AS, you can compare the effects of market volatilities on Scandinavian Brake and Tryg AS 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 Scandinavian Brake with a short position of Tryg AS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Scandinavian Brake and Tryg AS.

Diversification Opportunities for Scandinavian Brake and Tryg AS

-0.56

Correlation Coefficient

Scandinavian Brake  Tryg AS

Excellent diversification

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

Pair Corralation between Scandinavian Brake and Tryg AS

Assuming the 90 days trading horizon Scandinavian Brake Systems is expected to generate 1.11 times more return on investment than Tryg AS. However, Scandinavian Brake is 1.11 times more volatile than Tryg AS. It trades about 0.12 of its potential returns per unit of risk. Tryg AS is currently generating about -0.14 per unit of risk. If you would invest  1,165  in Scandinavian Brake Systems on October 6, 2024 and sell it today you would earn a total of  55.00  from holding Scandinavian Brake Systems or generate 4.72% return on investment over 90 days.

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

Scandinavian Brake Systems  vs.  Tryg AS

Scandinavian Brake

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Scandinavian Brake Systems has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Scandinavian Brake is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Tryg AS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tryg AS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Tryg AS is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Scandinavian Brake and Tryg AS

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

The idea behind Scandinavian Brake Systems and Tryg AS 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.