Correlation Between Peab AB and Holmen AB

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

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

Diversification Opportunities for Peab AB and Holmen AB

0.75

Correlation Coefficient

Peab AB  Holmen AB

Poor diversification

The 3 months correlation between Peab and Holmen is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Peab AB and Holmen AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Holmen AB and Peab AB 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 Peab AB are associated (or correlated) with Holmen AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Holmen AB has no effect on the direction of Peab AB i.e., Peab AB and Holmen AB go up and down completely randomly.

Pair Corralation between Peab AB and Holmen AB

Assuming the 90 days trading horizon Peab AB is expected to under-perform the Holmen AB. But the stock apears to be less risky and, when comparing its historical volatility, Peab AB is 1.05 times less risky than Holmen AB. The stock trades about -0.08 of its potential returns per unit of risk. The Holmen AB is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  37,600  in Holmen AB on May 7, 2025 and sell it today you would lose (1,100) from holding Holmen AB or give up 2.93% of portfolio value over 90 days.

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

Peab AB  vs.  Holmen AB

Peab AB

Risk-Adjusted Performance

Weakest

Over the last 90 days Peab AB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Holmen AB

Risk-Adjusted Performance

Weakest

Over the last 90 days Holmen AB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong essential indicators, Holmen AB is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Peab AB and Holmen AB

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

The idea behind Peab AB and Holmen 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.