Correlation Between Axactor SE and Lea Bank

Can any of the company-specific risk be diversified away by investing in both Axactor SE and Lea Bank 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 Axactor SE and Lea Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Axactor SE and Lea Bank ASA, you can compare the effects of market volatilities on Axactor SE and Lea Bank 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 Axactor SE with a short position of Lea Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Axactor SE and Lea Bank.

Diversification Opportunities for Axactor SE and Lea Bank

-0.6

Correlation Coefficient

Axactor SE  Lea Bank

Excellent diversification

The 3 months correlation between Axactor and Lea is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Axactor SE and Lea Bank ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lea Bank ASA and Axactor SE 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 Axactor SE are associated (or correlated) with Lea Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lea Bank ASA has no effect on the direction of Axactor SE i.e., Axactor SE and Lea Bank go up and down completely randomly.

Pair Corralation between Axactor SE and Lea Bank

Assuming the 90 days trading horizon Axactor SE is expected to under-perform the Lea Bank. But the stock apears to be less risky and, when comparing its historical volatility, Axactor SE is 1.12 times less risky than Lea Bank. The stock trades about -0.16 of its potential returns per unit of risk. The Lea Bank ASA is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  785.00  in Lea Bank ASA on September 2, 2024 and sell it today you would earn a total of  185.00  from holding Lea Bank ASA or generate 23.57% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Axactor SE  vs.  Lea Bank ASA

Axactor SE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Axactor SE has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Lea Bank ASA

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Lea Bank ASA are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Lea Bank disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Axactor SE and Lea Bank

The main advantage of trading using opposite Axactor SE and Lea Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Axactor SE position performs unexpectedly, Lea Bank 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 Lea Bank will offset losses from the drop in Lea Bank's long position.

The idea behind Axactor SE and Lea Bank ASA 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.

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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 Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.