Correlation Between Sweco AB and Eolus Vind

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

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

Diversification Opportunities for Sweco AB and Eolus Vind

0.37

Correlation Coefficient

Sweco AB  Eolus Vind

Weak diversification

The 3 months correlation between Sweco and Eolus is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Sweco AB and Eolus Vind AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eolus Vind AB and Sweco 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 Sweco AB are associated (or correlated) with Eolus Vind. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eolus Vind AB has no effect on the direction of Sweco AB i.e., Sweco AB and Eolus Vind go up and down completely randomly.

Pair Corralation between Sweco AB and Eolus Vind

Assuming the 90 days trading horizon Sweco AB is expected to generate 0.88 times more return on investment than Eolus Vind. However, Sweco AB is 1.14 times less risky than Eolus Vind. It trades about 0.11 of its potential returns per unit of risk. Eolus Vind AB is currently generating about -0.09 per unit of risk. If you would invest  11,800  in Sweco AB on September 24, 2024 and sell it today you would earn a total of  4,670  from holding Sweco AB or generate 39.58% return on investment over 90 days.

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

Sweco AB  vs.  Eolus Vind AB

Sweco AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sweco AB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong technical and fundamental indicators, Sweco AB is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Eolus Vind AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eolus Vind AB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong essential indicators, Eolus Vind is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Sweco AB and Eolus Vind

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

The idea behind Sweco AB and Eolus Vind 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.