Correlation Between Vector and Husqvarna

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

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

Diversification Opportunities for Vector and Husqvarna

0.32

Correlation Coefficient

Vector  Husqvarna

Weak diversification

The 3 months correlation between Vector and Husqvarna is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Vector Group and Husqvarna AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Husqvarna AB and Vector 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 Vector Group are associated (or correlated) with Husqvarna. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Husqvarna AB has no effect on the direction of Vector i.e., Vector and Husqvarna go up and down completely randomly.

Pair Corralation between Vector and Husqvarna

Considering the 90-day investment horizon Vector Group is expected to under-perform the Husqvarna. But the stock apears to be less risky and, when comparing its historical volatility, Vector Group is 1.04 times less risky than Husqvarna. The stock trades about -0.01 of its potential returns per unit of risk. The Husqvarna AB is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  1,613  in Husqvarna AB on January 21, 2024 and sell it today you would lose (138.00) from holding Husqvarna AB or give up 8.56% of portfolio value over 90 days.

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

Vector Group  vs.  Husqvarna AB

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 newest stock price agitation, may contribute to short-term losses for the retail investors.

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. In spite of fairly strong basic indicators, Husqvarna is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Vector and Husqvarna

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

The idea behind Vector Group and Husqvarna 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.

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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.