Correlation Between Skanska AB and Firefly AB

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

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

Diversification Opportunities for Skanska AB and Firefly AB

0.56

Correlation Coefficient

Skanska AB  Firefly AB

Very weak diversification

The 3 months correlation between Skanska and Firefly is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Skanska AB and Firefly AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Firefly AB and Skanska 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 Skanska AB are associated (or correlated) with Firefly AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Firefly AB has no effect on the direction of Skanska AB i.e., Skanska AB and Firefly AB go up and down completely randomly.

Pair Corralation between Skanska AB and Firefly AB

Assuming the 90 days trading horizon Skanska AB is expected to under-perform the Firefly AB. But the stock apears to be less risky and, when comparing its historical volatility, Skanska AB is 2.11 times less risky than Firefly AB. The stock trades about -0.08 of its potential returns per unit of risk. The Firefly AB is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  20,349  in Firefly AB on March 9, 2024 and sell it today you would earn a total of  2,051  from holding Firefly AB or generate 10.08% return on investment over 90 days.

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

Skanska AB  vs.  Firefly AB

Skanska AB

Risk-Adjusted Performance

1 of 100

Weak

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

Firefly AB

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Firefly AB are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Firefly AB unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Skanska AB and Firefly AB

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

The idea behind Skanska AB and Firefly 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.