Correlation Between Alfa Laval and Bjorn Borg

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

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

Diversification Opportunities for Alfa Laval and Bjorn Borg

0.56

Correlation Coefficient

Alfa Laval  Bjorn Borg

Very weak diversification

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

Pair Corralation between Alfa Laval and Bjorn Borg

Assuming the 90 days trading horizon Alfa Laval AB is expected to under-perform the Bjorn Borg. But the stock apears to be less risky and, when comparing its historical volatility, Alfa Laval AB is 2.94 times less risky than Bjorn Borg. The stock trades about -0.03 of its potential returns per unit of risk. The Bjorn Borg AB is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  4,895  in Bjorn Borg AB on March 29, 2024 and sell it today you would earn a total of  565.00  from holding Bjorn Borg AB or generate 11.54% return on investment over 90 days.

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

Alfa Laval AB  vs.  Bjorn Borg AB

Alfa Laval AB

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Alfa Laval AB are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Alfa Laval unveiled solid returns over the last few months and may actually be approaching a breakup point.

Bjorn Borg AB

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Bjorn Borg AB are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Bjorn Borg may actually be approaching a critical reversion point that can send shares even higher in July 2024.

Pair Trading with Alfa Laval and Bjorn Borg

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

The idea behind Alfa Laval AB and Bjorn Borg 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.