Correlation Between L E and MTI Investment
Can any of the company-specific risk be diversified away by investing in both L E and MTI Investment 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 MTI Investment 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 MTI Investment SE, you can compare the effects of market volatilities on L E and MTI Investment 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 MTI Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of L E and MTI Investment.
Diversification Opportunities for L E and MTI Investment
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between LUND-B and MTI is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding L E Lundbergfretagen and MTI Investment SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MTI Investment SE 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 MTI Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MTI Investment SE has no effect on the direction of L E i.e., L E and MTI Investment go up and down completely randomly.
Pair Corralation between L E and MTI Investment
Assuming the 90 days trading horizon L E Lundbergfretagen is expected to generate 0.34 times more return on investment than MTI Investment. However, L E Lundbergfretagen is 2.96 times less risky than MTI Investment. It trades about -0.01 of its potential returns per unit of risk. MTI Investment SE is currently generating about -0.07 per unit of risk. If you would invest 53,050 in L E Lundbergfretagen on September 3, 2024 and sell it today you would lose (150.00) from holding L E Lundbergfretagen or give up 0.28% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
L E Lundbergfretagen vs. MTI Investment SE
Performance |
| Timeline |
| L E Lundbergfretagen |
| MTI Investment SE |
L E and MTI Investment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with L E and MTI Investment
The main advantage of trading using opposite L E and MTI Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if L E position performs unexpectedly, MTI Investment 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 MTI Investment will offset losses from the drop in MTI Investment'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 |
| MTI Investment vs. L E Lundbergfretagen | MTI Investment vs. Industrivarden AB ser | MTI Investment vs. Svenska Handelsbanken AB | MTI Investment vs. Investment AB Latour |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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