Correlation Between Lipum AB and Smart Eye
Can any of the company-specific risk be diversified away by investing in both Lipum AB and Smart Eye 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 Smart Eye into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lipum AB and Smart Eye AB, you can compare the effects of market volatilities on Lipum AB and Smart Eye 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 Smart Eye. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lipum AB and Smart Eye.
Diversification Opportunities for Lipum AB and Smart Eye
Good diversification
The 3 months correlation between Lipum and Smart is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Lipum AB and Smart Eye AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Smart Eye 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 Smart Eye. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Smart Eye AB has no effect on the direction of Lipum AB i.e., Lipum AB and Smart Eye go up and down completely randomly.
Pair Corralation between Lipum AB and Smart Eye
Assuming the 90 days trading horizon Lipum AB is expected to generate 1.11 times more return on investment than Smart Eye. However, Lipum AB is 1.11 times more volatile than Smart Eye AB. It trades about 0.14 of its potential returns per unit of risk. Smart Eye AB is currently generating about -0.33 per unit of risk. If you would invest 1,390 in Lipum AB on November 18, 2024 and sell it today you would earn a total of 140.00 from holding Lipum AB or generate 10.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lipum AB vs. Smart Eye AB
Performance |
| Timeline |
| Lipum AB |
| Smart Eye AB |
Lipum AB and Smart Eye Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lipum AB and Smart Eye
The main advantage of trading using opposite Lipum AB and Smart Eye positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lipum AB position performs unexpectedly, Smart Eye 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 Smart Eye will offset losses from the drop in Smart Eye's long position.The idea behind Lipum AB and Smart Eye 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.| Smart Eye vs. OptiCept Technologies AB | Smart Eye vs. Intellego Technologies AB | Smart Eye vs. Viaplay Group AB | Smart Eye vs. FormPipe Software 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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