Correlation Between AB SKF and JM AB

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

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

Diversification Opportunities for AB SKF and JM AB

-0.27

Correlation Coefficient

AB SKF  JM AB

Very good diversification

The 3 months correlation between SKF-B and JM AB is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding AB SKF and JM AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JM AB and AB SKF 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 AB SKF are associated (or correlated) with JM AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JM AB has no effect on the direction of AB SKF i.e., AB SKF and JM AB go up and down completely randomly.

Pair Corralation between AB SKF and JM AB

Assuming the 90 days trading horizon AB SKF is expected to generate 0.95 times more return on investment than JM AB. However, AB SKF is 1.05 times less risky than JM AB. It trades about 0.01 of its potential returns per unit of risk. JM AB is currently generating about -0.11 per unit of risk. If you would invest  20,760  in AB SKF on December 29, 2024 and sell it today you would lose (60.00) from holding AB SKF or give up 0.29% of portfolio value over 90 days.

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

AB SKF  vs.  JM AB

AB SKF

Risk-Adjusted Performance

Very Weak

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

JM AB

Risk-Adjusted Performance

Very Weak

Over the last 90 days JM 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 April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with AB SKF and JM AB

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

The idea behind AB SKF and JM 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.