Correlation Between Investment and L E
Can any of the company-specific risk be diversified away by investing in both Investment and L E 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 Investment and L E into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Investment AB Oresund and L E Lundbergfretagen, you can compare the effects of market volatilities on Investment and L E 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 Investment with a short position of L E. Check out your portfolio center. Please also check ongoing floating volatility patterns of Investment and L E.
Diversification Opportunities for Investment and L E
0.91 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Investment and LUND-B is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Investment AB Oresund and L E Lundbergfretagen in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on L E Lundbergfretagen and Investment 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 Investment AB Oresund are associated (or correlated) with L E. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of L E Lundbergfretagen has no effect on the direction of Investment i.e., Investment and L E go up and down completely randomly.
Pair Corralation between Investment and L E
Assuming the 90 days trading horizon Investment AB Oresund is expected to generate 1.45 times more return on investment than L E. However, Investment is 1.45 times more volatile than L E Lundbergfretagen. It trades about 0.05 of its potential returns per unit of risk. L E Lundbergfretagen is currently generating about 0.01 per unit of risk. If you would invest 9,502 in Investment AB Oresund on September 2, 2024 and sell it today you would earn a total of 1,658 from holding Investment AB Oresund or generate 17.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Investment AB Oresund vs. L E Lundbergfretagen
Performance |
| Timeline |
| Investment AB Oresund |
| L E Lundbergfretagen |
Investment and L E Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Investment and L E
The main advantage of trading using opposite Investment and L E positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Investment position performs unexpectedly, L E 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 L E will offset losses from the drop in L E's long position.| Investment vs. Bure Equity AB | Investment vs. Creades AB | Investment vs. L E Lundbergfretagen | Investment vs. Industrivarden AB ser |
| L E vs. Investment AB Latour | L E vs. Industrivarden AB ser | L E vs. Kinnevik Investment AB | L E vs. Investor 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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