Correlation Between ALM Equity and Lipidor Ab
Can any of the company-specific risk be diversified away by investing in both ALM Equity and Lipidor 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 ALM Equity and Lipidor Ab 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 Lipidor Ab, you can compare the effects of market volatilities on ALM Equity and Lipidor 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 ALM Equity with a short position of Lipidor Ab. Check out your portfolio center. Please also check ongoing floating volatility patterns of ALM Equity and Lipidor Ab.
Diversification Opportunities for ALM Equity and Lipidor Ab
-0.6 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between ALM and Lipidor is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding ALM Equity AB and Lipidor Ab in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lipidor Ab 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 Lipidor Ab. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lipidor Ab has no effect on the direction of ALM Equity i.e., ALM Equity and Lipidor Ab go up and down completely randomly.
Pair Corralation between ALM Equity and Lipidor Ab
Assuming the 90 days trading horizon ALM Equity AB is expected to under-perform the Lipidor Ab. But the stock apears to be less risky and, when comparing its historical volatility, ALM Equity AB is 2.23 times less risky than Lipidor Ab. The stock trades about -0.07 of its potential returns per unit of risk. The Lipidor Ab is currently generating about 0.74 of returns per unit of risk over similar time horizon. If you would invest 17.00 in Lipidor Ab on October 12, 2024 and sell it today you would earn a total of 15.00 from holding Lipidor Ab or generate 88.24% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
ALM Equity AB vs. Lipidor Ab
Performance |
| Timeline |
| ALM Equity AB |
| Lipidor Ab |
ALM Equity and Lipidor Ab Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ALM Equity and Lipidor Ab
The main advantage of trading using opposite ALM Equity and Lipidor Ab positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ALM Equity position performs unexpectedly, Lipidor 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 Lipidor Ab will offset losses from the drop in Lipidor Ab's long position.| ALM Equity vs. ALM Equity AB | ALM Equity vs. Bufab Holding AB | ALM Equity vs. Atrium Ljungberg AB | ALM Equity vs. Bravida Holding AB |
| Lipidor Ab vs. BioInvent International AB | Lipidor Ab vs. Hansa Biopharma AB | Lipidor Ab vs. ExpreS2ion Biotech Holding | Lipidor Ab vs. Saniona AB |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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