Correlation Between AB SKF and Boliden AB

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

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

Diversification Opportunities for AB SKF and Boliden AB

0.75

Correlation Coefficient

AB SKF  Boliden AB

Poor diversification

The 3 months correlation between SKF-B and Boliden is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding AB SKF and Boliden AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boliden AB and AB SKF 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 AB SKF are associated (or correlated) with Boliden AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Boliden AB has no effect on the direction of AB SKF i.e., AB SKF and Boliden AB go up and down completely randomly.

Pair Corralation between AB SKF and Boliden AB

Assuming the 90 days trading horizon AB SKF is expected to generate 3.1 times less return on investment than Boliden AB. But when comparing it to its historical volatility, AB SKF is 1.61 times less risky than Boliden AB. It trades about 0.13 of its potential returns per unit of risk. Boliden AB is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest  27,002  in Boliden AB on February 18, 2024 and sell it today you would earn a total of  9,818  from holding Boliden AB or generate 36.36% return on investment over 90 days.

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

AB SKF  vs.  Boliden AB

AB SKF

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in AB SKF are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain fundamental drivers, AB SKF may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Boliden AB

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Boliden AB are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain essential indicators, Boliden AB unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with AB SKF and Boliden AB

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

The idea behind AB SKF and Boliden 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.