Correlation Between Husqvarna and Vector

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

By analyzing existing cross correlation between Husqvarna AB and Vector Group, you can compare the effects of market volatilities on Husqvarna and Vector 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 Vector. Check out your portfolio center. Please also check ongoing floating volatility patterns of Husqvarna and Vector.

Diversification Opportunities for Husqvarna and Vector

-0.23

Correlation Coefficient

Husqvarna  Vector

Very good diversification

The 3 months correlation between Husqvarna and Vector is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Husqvarna AB and Vector Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vector Group 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 Vector. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vector Group has no effect on the direction of Husqvarna i.e., Husqvarna and Vector go up and down completely randomly.

Pair Corralation between Husqvarna and Vector

Assuming the 90 days horizon Husqvarna AB is expected to under-perform the Vector. In addition to that, Husqvarna is 1.77 times more volatile than Vector Group. It trades about -0.21 of its total potential returns per unit of risk. Vector Group is currently generating about -0.07 per unit of volatility. If you would invest  1,071  in Vector Group on January 25, 2024 and sell it today you would lose (26.00) from holding Vector Group or give up 2.43% 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.  Vector Group

Husqvarna AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Husqvarna AB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Husqvarna is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Vector Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vector Group has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable technical and fundamental indicators, Vector is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Husqvarna and Vector

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

The idea behind Husqvarna AB and Vector Group 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.