Correlation Between Vestum AB and Afry AB

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

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

Diversification Opportunities for Vestum AB and Afry AB

-0.59

Correlation Coefficient

Vestum AB  Afry AB

Excellent diversification

The 3 months correlation between Vestum and Afry is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Vestum AB and Afry AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Afry AB and Vestum 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 Vestum AB are associated (or correlated) with Afry AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Afry AB has no effect on the direction of Vestum AB i.e., Vestum AB and Afry AB go up and down completely randomly.

Pair Corralation between Vestum AB and Afry AB

Assuming the 90 days trading horizon Vestum AB is expected to generate 1.22 times more return on investment than Afry AB. However, Vestum AB is 1.22 times more volatile than Afry AB. It trades about 0.08 of its potential returns per unit of risk. Afry AB is currently generating about -0.1 per unit of risk. If you would invest  998.00  in Vestum AB on October 3, 2024 and sell it today you would earn a total of  122.00  from holding Vestum AB or generate 12.22% return on investment over 90 days.

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

Vestum AB  vs.  Afry AB

Vestum AB

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Vestum AB are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Vestum AB sustained solid returns over the last few months and may actually be approaching a breakup point.

Afry AB

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Vestum AB and Afry AB

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

The idea behind Vestum AB and Afry 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.