Correlation Between Gevo and AB SKF

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

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

Diversification Opportunities for Gevo and AB SKF

-0.74

Correlation Coefficient

Gevo  AB SKF

Pay attention - limited upside

The 3 months correlation between Gevo and SKFA is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Gevo Inc and AB SKF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AB SKF and Gevo 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 Gevo Inc are associated (or correlated) with AB SKF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AB SKF has no effect on the direction of Gevo i.e., Gevo and AB SKF go up and down completely randomly.

Pair Corralation between Gevo and AB SKF

Assuming the 90 days trading horizon Gevo is expected to generate 3.01 times less return on investment than AB SKF. In addition to that, Gevo is 3.92 times more volatile than AB SKF. It trades about 0.01 of its total potential returns per unit of risk. AB SKF is currently generating about 0.12 per unit of volatility. If you would invest  1,782  in AB SKF on December 20, 2024 and sell it today you would earn a total of  283.00  from holding AB SKF or generate 15.88% return on investment over 90 days.

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

Gevo Inc  vs.  AB SKF

Gevo Inc

Risk-Adjusted Performance

Weak

Over the last 90 days Gevo Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Gevo is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

AB SKF

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in AB SKF are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, AB SKF reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Gevo and AB SKF

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

The idea behind Gevo Inc and AB SKF 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 Stocks Directory module to find actively traded stocks across global markets.