Correlation Between Husqvarna and Imperial Brands

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

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

Diversification Opportunities for Husqvarna and Imperial Brands

-0.37

Correlation Coefficient

Husqvarna  Imperial Brands

Very good diversification

The 3 months correlation between Husqvarna and Imperial is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Husqvarna AB and Imperial Brands PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Imperial Brands PLC and Husqvarna 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 Husqvarna AB are associated (or correlated) with Imperial Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Imperial Brands PLC has no effect on the direction of Husqvarna i.e., Husqvarna and Imperial Brands go up and down completely randomly.

Pair Corralation between Husqvarna and Imperial Brands

Assuming the 90 days horizon Husqvarna AB is expected to generate 1.2 times more return on investment than Imperial Brands. However, Husqvarna is 1.2 times more volatile than Imperial Brands PLC. It trades about -0.01 of its potential returns per unit of risk. Imperial Brands PLC is currently generating about -0.04 per unit of risk. If you would invest  1,564  in Husqvarna AB on January 24, 2024 and sell it today you would lose (22.00) from holding Husqvarna AB or give up 1.41% of portfolio value over 90 days.

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

Husqvarna AB  vs.  Imperial Brands PLC

Husqvarna AB

Risk-Adjusted Performance

2 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Husqvarna AB are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Husqvarna is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Imperial Brands PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Imperial Brands PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong fundamental drivers, Imperial Brands is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Husqvarna and Imperial Brands

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

The idea behind Husqvarna AB and Imperial Brands PLC 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..