Correlation Between AB Traction and Heimstaden

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

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

Diversification Opportunities for AB Traction and Heimstaden

-0.4

Correlation Coefficient

AB Traction  Heimstaden

Very good diversification

The 3 months correlation between TRAC-B and Heimstaden is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding AB Traction and Heimstaden AB Pfd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Heimstaden AB Pfd and AB Traction 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 Traction are associated (or correlated) with Heimstaden. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Heimstaden AB Pfd has no effect on the direction of AB Traction i.e., AB Traction and Heimstaden go up and down completely randomly.

Pair Corralation between AB Traction and Heimstaden

Assuming the 90 days trading horizon AB Traction is expected to generate 0.64 times more return on investment than Heimstaden. However, AB Traction is 1.57 times less risky than Heimstaden. It trades about 0.0 of its potential returns per unit of risk. Heimstaden AB Pfd is currently generating about -0.03 per unit of risk. If you would invest  27,600  in AB Traction on November 29, 2024 and sell it today you would lose (100.00) from holding AB Traction or give up 0.36% of portfolio value over 90 days.

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

AB Traction  vs.  Heimstaden AB Pfd

AB Traction

Risk-Adjusted Performance

Very Weak

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

Heimstaden AB Pfd

Risk-Adjusted Performance

Very Weak

Over the last 90 days Heimstaden AB Pfd has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Heimstaden is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with AB Traction and Heimstaden

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

The idea behind AB Traction and Heimstaden AB Pfd 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 Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.