Correlation Between Lipum AB and Novotek AB
Can any of the company-specific risk be diversified away by investing in both Lipum AB and Novotek 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 Novotek 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 Novotek AB, you can compare the effects of market volatilities on Lipum AB and Novotek 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 Novotek AB. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lipum AB and Novotek AB.
Diversification Opportunities for Lipum AB and Novotek AB
0.21 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Lipum and Novotek is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Lipum AB and Novotek AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Novotek 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 Novotek AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Novotek AB has no effect on the direction of Lipum AB i.e., Lipum AB and Novotek AB go up and down completely randomly.
Pair Corralation between Lipum AB and Novotek AB
Assuming the 90 days trading horizon Lipum AB is expected to generate 2.09 times more return on investment than Novotek AB. However, Lipum AB is 2.09 times more volatile than Novotek AB. It trades about 0.06 of its potential returns per unit of risk. Novotek AB is currently generating about 0.05 per unit of risk. If you would invest 900.00 in Lipum AB on August 26, 2024 and sell it today you would earn a total of 770.00 from holding Lipum AB or generate 85.56% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lipum AB vs. Novotek AB
Performance |
| Timeline |
| Lipum AB |
| Novotek AB |
Lipum AB and Novotek AB Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lipum AB and Novotek AB
The main advantage of trading using opposite Lipum AB and Novotek AB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lipum AB position performs unexpectedly, Novotek 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 Novotek AB will offset losses from the drop in Novotek AB's long position.The idea behind Lipum AB and Novotek 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.| Novotek AB vs. Softronic AB | Novotek AB vs. Prevas AB | Novotek AB vs. FormPipe Software AB | Novotek AB vs. Dedicare 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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