Correlation Between Skanska AB and NCC AB

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

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

Diversification Opportunities for Skanska AB and NCC AB

0.67

Correlation Coefficient

Skanska AB  NCC AB

Poor diversification

The 3 months correlation between Skanska and NCC is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Skanska AB and NCC AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NCC AB and Skanska 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 Skanska AB are associated (or correlated) with NCC AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NCC AB has no effect on the direction of Skanska AB i.e., Skanska AB and NCC AB go up and down completely randomly.

Pair Corralation between Skanska AB and NCC AB

Assuming the 90 days trading horizon Skanska AB is expected to under-perform the NCC AB. In addition to that, Skanska AB is 1.02 times more volatile than NCC AB. It trades about -0.03 of its total potential returns per unit of risk. NCC AB is currently generating about 0.16 per unit of volatility. If you would invest  16,380  in NCC AB on December 31, 2024 and sell it today you would earn a total of  2,820  from holding NCC AB or generate 17.22% return on investment over 90 days.

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

Skanska AB  vs.  NCC AB

Skanska AB

Risk-Adjusted Performance

Very Weak

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

NCC AB

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in NCC AB are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, NCC AB unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Skanska AB and NCC AB

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

The idea behind Skanska AB and NCC 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..