Correlation Between Hufvudstaden and ATT
Can any of the company-specific risk be diversified away by investing in both Hufvudstaden and ATT 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 Hufvudstaden and ATT into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hufvudstaden AB and ATT Inc, you can compare the effects of market volatilities on Hufvudstaden and ATT 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 Hufvudstaden with a short position of ATT. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hufvudstaden and ATT.
Diversification Opportunities for Hufvudstaden and ATT
0.4 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Hufvudstaden and ATT is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Hufvudstaden AB and ATT Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ATT Inc and Hufvudstaden 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 Hufvudstaden AB are associated (or correlated) with ATT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ATT Inc has no effect on the direction of Hufvudstaden i.e., Hufvudstaden and ATT go up and down completely randomly.
Pair Corralation between Hufvudstaden and ATT
Assuming the 90 days trading horizon Hufvudstaden AB is expected to generate 1.42 times more return on investment than ATT. However, Hufvudstaden is 1.42 times more volatile than ATT Inc. It trades about -0.04 of its potential returns per unit of risk. ATT Inc is currently generating about -0.16 per unit of risk. If you would invest 12,830 in Hufvudstaden AB on January 24, 2024 and sell it today you would lose (150.00) from holding Hufvudstaden AB or give up 1.17% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.0% |
| Values | Daily Returns |
Hufvudstaden AB vs. ATT Inc
Performance |
| Timeline |
| Hufvudstaden AB |
| ATT Inc |
Hufvudstaden and ATT Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hufvudstaden and ATT
The main advantage of trading using opposite Hufvudstaden and ATT positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hufvudstaden position performs unexpectedly, ATT 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 ATT will offset losses from the drop in ATT's long position.| Hufvudstaden vs. Fabege AB | Hufvudstaden vs. Castellum AB | Hufvudstaden vs. Wallenstam AB | Hufvudstaden vs. Fastighets AB Balder |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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