Correlation Between Axfood AB and Sovereign Metals

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

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

Diversification Opportunities for Axfood AB and Sovereign Metals

-0.02

Correlation Coefficient

Axfood AB  Sovereign Metals

Good diversification

The 3 months correlation between Axfood and Sovereign is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Axfood AB and Sovereign Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sovereign Metals and Axfood 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 Axfood AB are associated (or correlated) with Sovereign Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sovereign Metals has no effect on the direction of Axfood AB i.e., Axfood AB and Sovereign Metals go up and down completely randomly.

Pair Corralation between Axfood AB and Sovereign Metals

Assuming the 90 days trading horizon Axfood AB is expected to generate 0.62 times more return on investment than Sovereign Metals. However, Axfood AB is 1.63 times less risky than Sovereign Metals. It trades about 0.22 of its potential returns per unit of risk. Sovereign Metals is currently generating about 0.03 per unit of risk. If you would invest  24,775  in Axfood AB on April 20, 2025 and sell it today you would earn a total of  4,185  from holding Axfood AB or generate 16.89% return on investment over 90 days.

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

Axfood AB  vs.  Sovereign Metals

Axfood AB

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Axfood AB are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Axfood AB unveiled solid returns over the last few months and may actually be approaching a breakup point.

Sovereign Metals

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sovereign Metals are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Sovereign Metals is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Axfood AB and Sovereign Metals

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

The idea behind Axfood AB and Sovereign Metals 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.