Correlation Between LyondellBasell Industries and Diamyd Medical
Can any of the company-specific risk be diversified away by investing in both LyondellBasell Industries and Diamyd Medical 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 LyondellBasell Industries and Diamyd Medical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LyondellBasell Industries NV and Diamyd Medical AB, you can compare the effects of market volatilities on LyondellBasell Industries and Diamyd Medical 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 LyondellBasell Industries with a short position of Diamyd Medical. Check out your portfolio center. Please also check ongoing floating volatility patterns of LyondellBasell Industries and Diamyd Medical.
Diversification Opportunities for LyondellBasell Industries and Diamyd Medical
0.28 | Correlation Coefficient |
Modest diversification
The 3 months correlation between LyondellBasell and Diamyd is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding LyondellBasell Industries NV and Diamyd Medical AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Diamyd Medical AB and LyondellBasell Industries 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 LyondellBasell Industries NV are associated (or correlated) with Diamyd Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Diamyd Medical AB has no effect on the direction of LyondellBasell Industries i.e., LyondellBasell Industries and Diamyd Medical go up and down completely randomly.
Pair Corralation between LyondellBasell Industries and Diamyd Medical
Assuming the 90 days horizon LyondellBasell Industries is expected to generate 6.19 times less return on investment than Diamyd Medical. But when comparing it to its historical volatility, LyondellBasell Industries NV is 3.49 times less risky than Diamyd Medical. It trades about 0.02 of its potential returns per unit of risk. Diamyd Medical AB is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 124.00 in Diamyd Medical AB on September 13, 2024 and sell it today you would earn a total of 10.00 from holding Diamyd Medical AB or generate 8.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
LyondellBasell Industries NV vs. Diamyd Medical AB
Performance |
| Timeline |
| LyondellBasell Industries |
| Diamyd Medical AB |
LyondellBasell Industries and Diamyd Medical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LyondellBasell Industries and Diamyd Medical
The main advantage of trading using opposite LyondellBasell Industries and Diamyd Medical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LyondellBasell Industries position performs unexpectedly, Diamyd Medical 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 Diamyd Medical will offset losses from the drop in Diamyd Medical's long position.The idea behind LyondellBasell Industries NV and Diamyd Medical 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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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.
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