Correlation Between Lipum AB and Midsona AB
Can any of the company-specific risk be diversified away by investing in both Lipum AB and Midsona 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 Lipum AB and Midsona AB into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lipum AB and Midsona AB, you can compare the effects of market volatilities on Lipum AB and Midsona 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 Lipum AB with a short position of Midsona AB. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lipum AB and Midsona AB.
Diversification Opportunities for Lipum AB and Midsona AB
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Lipum and Midsona is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Lipum AB and Midsona AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Midsona AB and Lipum 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 Lipum AB are associated (or correlated) with Midsona AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Midsona AB has no effect on the direction of Lipum AB i.e., Lipum AB and Midsona AB go up and down completely randomly.
Pair Corralation between Lipum AB and Midsona AB
Assuming the 90 days trading horizon Lipum AB is expected to generate 3.53 times more return on investment than Midsona AB. However, Lipum AB is 3.53 times more volatile than Midsona AB. It trades about 0.1 of its potential returns per unit of risk. Midsona AB is currently generating about 0.06 per unit of risk. If you would invest 652.00 in Lipum AB on August 25, 2024 and sell it today you would earn a total of 1,018 from holding Lipum AB or generate 156.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lipum AB vs. Midsona AB
Performance |
| Timeline |
| Lipum AB |
| Midsona AB |
Lipum AB and Midsona AB Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lipum AB and Midsona AB
The main advantage of trading using opposite Lipum AB and Midsona AB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lipum AB position performs unexpectedly, Midsona 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 Midsona AB will offset losses from the drop in Midsona AB's long position.The idea behind Lipum AB and Midsona 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.| Midsona AB vs. Samhllsbyggnadsbolaget i Norden | Midsona AB vs. Media and Games | Midsona AB vs. Hexatronic Group AB | Midsona AB vs. Sinch 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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