Correlation Between Lipum AB and Norva24 Group
Can any of the company-specific risk be diversified away by investing in both Lipum AB and Norva24 Group 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 Norva24 Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lipum AB and Norva24 Group AB, you can compare the effects of market volatilities on Lipum AB and Norva24 Group 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 Norva24 Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lipum AB and Norva24 Group.
Diversification Opportunities for Lipum AB and Norva24 Group
0.19 | Correlation Coefficient |
Average diversification
The 3 months correlation between Lipum and Norva24 is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Lipum AB and Norva24 Group AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Norva24 Group 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 Norva24 Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Norva24 Group AB has no effect on the direction of Lipum AB i.e., Lipum AB and Norva24 Group go up and down completely randomly.
Pair Corralation between Lipum AB and Norva24 Group
Assuming the 90 days trading horizon Lipum AB is expected to generate 2.0 times more return on investment than Norva24 Group. However, Lipum AB is 2.0 times more volatile than Norva24 Group AB. It trades about 0.02 of its potential returns per unit of risk. Norva24 Group AB is currently generating about -0.02 per unit of risk. If you would invest 1,400 in Lipum AB on October 30, 2024 and sell it today you would earn a total of 40.00 from holding Lipum AB or generate 2.86% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 99.8% |
| Values | Daily Returns |
Lipum AB vs. Norva24 Group AB
Performance |
| Timeline |
| Lipum AB |
| Norva24 Group AB |
Lipum AB and Norva24 Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lipum AB and Norva24 Group
The main advantage of trading using opposite Lipum AB and Norva24 Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lipum AB position performs unexpectedly, Norva24 Group 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 Norva24 Group will offset losses from the drop in Norva24 Group's long position.The idea behind Lipum AB and Norva24 Group 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.| Norva24 Group vs. Fasadgruppen Group AB | Norva24 Group vs. Green Landscaping Group | Norva24 Group vs. Volati AB | Norva24 Group vs. Instalco Intressenter 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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