Correlation Between Skanska AB and Trelleborg

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

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

Diversification Opportunities for Skanska AB and Trelleborg

0.85

Correlation Coefficient

Skanska AB  Trelleborg

Very poor diversification

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

Pair Corralation between Skanska AB and Trelleborg

Assuming the 90 days trading horizon Skanska AB is expected to generate 1.52 times less return on investment than Trelleborg. In addition to that, Skanska AB is 1.09 times more volatile than Trelleborg AB. It trades about 0.13 of its total potential returns per unit of risk. Trelleborg AB is currently generating about 0.22 per unit of volatility. If you would invest  36,060  in Trelleborg AB on November 29, 2024 and sell it today you would earn a total of  6,600  from holding Trelleborg AB or generate 18.3% return on investment over 90 days.

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

Skanska AB  vs.  Trelleborg AB

Skanska AB

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Skanska AB are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Skanska AB may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Trelleborg AB

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Trelleborg AB are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain technical and fundamental indicators, Trelleborg sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Skanska AB and Trelleborg

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

The idea behind Skanska AB and Trelleborg 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.