Correlation Between AlzeCure Pharma and Litium AB

Can any of the company-specific risk be diversified away by investing in both AlzeCure Pharma and Litium AB 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 AlzeCure Pharma and Litium AB into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between AlzeCure Pharma and Litium AB, you can compare the effects of market volatilities on AlzeCure Pharma and Litium AB 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 AlzeCure Pharma with a short position of Litium AB. Check out your portfolio center. Please also check ongoing floating volatility patterns of AlzeCure Pharma and Litium AB.

Diversification Opportunities for AlzeCure Pharma and Litium AB

0.61

Correlation Coefficient

AlzeCure Pharma  Litium AB

Poor diversification

The 3 months correlation between AlzeCure and Litium is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding AlzeCure Pharma and Litium AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Litium AB and AlzeCure Pharma 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 AlzeCure Pharma are associated (or correlated) with Litium AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Litium AB has no effect on the direction of AlzeCure Pharma i.e., AlzeCure Pharma and Litium AB go up and down completely randomly.

Pair Corralation between AlzeCure Pharma and Litium AB

Assuming the 90 days trading horizon AlzeCure Pharma is expected to generate 1.88 times less return on investment than Litium AB. In addition to that, AlzeCure Pharma is 1.54 times more volatile than Litium AB. It trades about 0.15 of its total potential returns per unit of risk. Litium AB is currently generating about 0.43 per unit of volatility. If you would invest  766.00  in Litium AB on October 12, 2024 and sell it today you would earn a total of  224.00  from holding Litium AB or generate 29.24% return on investment over 90 days.

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

AlzeCure Pharma  vs.  Litium AB

AlzeCure Pharma

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AlzeCure Pharma has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Litium AB

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Litium AB are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Litium AB unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with AlzeCure Pharma and Litium AB

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

The idea behind AlzeCure Pharma and Litium 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.

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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 Equity Valuation module to check real value of public entities based on technical and fundamental data.