Correlation Between Trelleborg and HEXPOL AB

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

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

Diversification Opportunities for Trelleborg and HEXPOL AB

0.63

Correlation Coefficient

Trelleborg  HEXPOL AB

Poor diversification

The 3 months correlation between Trelleborg and HEXPOL is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Trelleborg AB and HEXPOL AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HEXPOL AB and Trelleborg 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 Trelleborg AB are associated (or correlated) with HEXPOL AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HEXPOL AB has no effect on the direction of Trelleborg i.e., Trelleborg and HEXPOL AB go up and down completely randomly.

Pair Corralation between Trelleborg and HEXPOL AB

Assuming the 90 days trading horizon Trelleborg AB is expected to under-perform the HEXPOL AB. But the stock apears to be less risky and, when comparing its historical volatility, Trelleborg AB is 1.08 times less risky than HEXPOL AB. The stock trades about -0.1 of its potential returns per unit of risk. The HEXPOL AB is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  11,250  in HEXPOL AB on September 3, 2024 and sell it today you would lose (680.00) from holding HEXPOL AB or give up 6.04% of portfolio value over 90 days.

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

Trelleborg AB  vs.  HEXPOL AB

Trelleborg AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Trelleborg AB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

HEXPOL AB

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Trelleborg and HEXPOL AB

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

The idea behind Trelleborg AB and HEXPOL 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.

Check out your portfolio center.

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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.