Correlation Between Wallenstam and NP3 Fastigheter

Can any of the company-specific risk be diversified away by investing in both Wallenstam and NP3 Fastigheter 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 Wallenstam and NP3 Fastigheter into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Wallenstam AB and NP3 Fastigheter AB, you can compare the effects of market volatilities on Wallenstam and NP3 Fastigheter 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 Wallenstam with a short position of NP3 Fastigheter. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wallenstam and NP3 Fastigheter.

Diversification Opportunities for Wallenstam and NP3 Fastigheter

0.63

Correlation Coefficient

Wallenstam  NP3 Fastigheter

Poor diversification

The 3 months correlation between Wallenstam and NP3 is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Wallenstam AB and NP3 Fastigheter AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NP3 Fastigheter AB and Wallenstam 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 Wallenstam AB are associated (or correlated) with NP3 Fastigheter. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NP3 Fastigheter AB has no effect on the direction of Wallenstam i.e., Wallenstam and NP3 Fastigheter go up and down completely randomly.

Pair Corralation between Wallenstam and NP3 Fastigheter

Assuming the 90 days trading horizon Wallenstam AB is expected to under-perform the NP3 Fastigheter. But the stock apears to be less risky and, when comparing its historical volatility, Wallenstam AB is 1.19 times less risky than NP3 Fastigheter. The stock trades about -0.07 of its potential returns per unit of risk. The NP3 Fastigheter AB is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  25,699  in NP3 Fastigheter AB on November 29, 2024 and sell it today you would earn a total of  301.00  from holding NP3 Fastigheter AB or generate 1.17% return on investment over 90 days.

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

Wallenstam AB  vs.  NP3 Fastigheter AB

Wallenstam AB

Risk-Adjusted Performance

Very Weak

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

NP3 Fastigheter AB

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in NP3 Fastigheter AB are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, NP3 Fastigheter is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Wallenstam and NP3 Fastigheter

The main advantage of trading using opposite Wallenstam and NP3 Fastigheter positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wallenstam position performs unexpectedly, NP3 Fastigheter 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 NP3 Fastigheter will offset losses from the drop in NP3 Fastigheter's long position.

The idea behind Wallenstam AB and NP3 Fastigheter 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.