Correlation Between L E and Investor
Can any of the company-specific risk be diversified away by investing in both L E and Investor 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 L E and Investor into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between L E Lundbergfretagen and Investor AB ser, you can compare the effects of market volatilities on L E and Investor 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 L E with a short position of Investor. Check out your portfolio center. Please also check ongoing floating volatility patterns of L E and Investor.
Diversification Opportunities for L E and Investor
Very weak diversification
The 3 months correlation between LUND-B and Investor is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding L E Lundbergfretagen and Investor AB ser in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Investor AB ser and L E 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 L E Lundbergfretagen are associated (or correlated) with Investor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Investor AB ser has no effect on the direction of L E i.e., L E and Investor go up and down completely randomly.
Pair Corralation between L E and Investor
Assuming the 90 days trading horizon L E is expected to generate 1.2 times less return on investment than Investor. But when comparing it to its historical volatility, L E Lundbergfretagen is 1.11 times less risky than Investor. It trades about 0.35 of its potential returns per unit of risk. Investor AB ser is currently generating about 0.38 of returns per unit of risk over similar time horizon. If you would invest 29,600 in Investor AB ser on November 2, 2024 and sell it today you would earn a total of 2,155 from holding Investor AB ser or generate 7.28% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
L E Lundbergfretagen vs. Investor AB ser
Performance |
| Timeline |
| L E Lundbergfretagen |
| Investor AB ser |
L E and Investor Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with L E and Investor
The main advantage of trading using opposite L E and Investor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if L E position performs unexpectedly, Investor 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 Investor will offset losses from the drop in Investor's long position.| L E vs. Investment AB Latour | L E vs. Industrivarden AB ser | L E vs. Kinnevik Investment AB | L E vs. Investor AB ser |
| Investor vs. Kinnevik Investment AB | Investor vs. Investment AB Latour | Investor vs. Samhllsbyggnadsbolaget i Norden | Investor vs. Industrivarden AB ser |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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