Correlation Between AB SKF and Systemair

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

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

Diversification Opportunities for AB SKF and Systemair

0.54

Correlation Coefficient

AB SKF  Systemair

Very weak diversification

The 3 months correlation between SKF-B and Systemair is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding AB SKF and Systemair AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Systemair 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 Systemair. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Systemair AB has no effect on the direction of AB SKF i.e., AB SKF and Systemair go up and down completely randomly.

Pair Corralation between AB SKF and Systemair

Assuming the 90 days trading horizon AB SKF is expected to generate 0.78 times more return on investment than Systemair. However, AB SKF is 1.28 times less risky than Systemair. It trades about 0.2 of its potential returns per unit of risk. Systemair AB is currently generating about 0.1 per unit of risk. If you would invest  17,945  in AB SKF on September 11, 2024 and sell it today you would earn a total of  4,445  from holding AB SKF or generate 24.77% return on investment over 90 days.

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

AB SKF  vs.  Systemair AB

AB SKF

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in AB SKF are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, AB SKF unveiled solid returns over the last few months and may actually be approaching a breakup point.

Systemair AB

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Systemair AB are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Systemair unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with AB SKF and Systemair

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

The idea behind AB SKF and Systemair 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.