Correlation Between ALM Equity and ScandBook Holding

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

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

Diversification Opportunities for ALM Equity and ScandBook Holding

0.56

Correlation Coefficient

ALM Equity  ScandBook Holding

Very weak diversification

The 3 months correlation between ALM and ScandBook is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding ALM Equity AB and ScandBook Holding AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ScandBook Holding and ALM Equity 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 ALM Equity AB are associated (or correlated) with ScandBook Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ScandBook Holding has no effect on the direction of ALM Equity i.e., ALM Equity and ScandBook Holding go up and down completely randomly.

Pair Corralation between ALM Equity and ScandBook Holding

Assuming the 90 days trading horizon ALM Equity is expected to generate 2.86 times less return on investment than ScandBook Holding. But when comparing it to its historical volatility, ALM Equity AB is 3.54 times less risky than ScandBook Holding. It trades about 0.16 of its potential returns per unit of risk. ScandBook Holding AB is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  3,685  in ScandBook Holding AB on April 24, 2025 and sell it today you would earn a total of  575.00  from holding ScandBook Holding AB or generate 15.6% return on investment over 90 days.

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

ALM Equity AB  vs.  ScandBook Holding AB

ALM Equity AB

Risk-Adjusted Performance

Good

Over the last 90 days ALM Equity AB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, ALM Equity is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

ScandBook Holding

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ScandBook Holding AB are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, ScandBook Holding unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ALM Equity and ScandBook Holding

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

The idea behind ALM Equity AB and ScandBook Holding 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 Transaction History module to view history of all your transactions and understand their impact on performance.