Correlation Between Evolution and Lifco AB

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

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

Diversification Opportunities for Evolution and Lifco AB

-0.21

Correlation Coefficient

Evolution  Lifco AB

Very good diversification

The 3 months correlation between Evolution and Lifco is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Evolution AB and Lifco AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lifco AB and Evolution 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 Evolution AB are associated (or correlated) with Lifco AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lifco AB has no effect on the direction of Evolution i.e., Evolution and Lifco AB go up and down completely randomly.

Pair Corralation between Evolution and Lifco AB

Assuming the 90 days trading horizon Evolution AB is expected to under-perform the Lifco AB. In addition to that, Evolution is 1.5 times more volatile than Lifco AB. It trades about -0.04 of its total potential returns per unit of risk. Lifco AB is currently generating about -0.04 per unit of volatility. If you would invest  33,460  in Lifco AB on September 24, 2024 and sell it today you would lose (1,420) from holding Lifco AB or give up 4.24% of portfolio value over 90 days.

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

Evolution AB  vs.  Lifco AB

Evolution AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Evolution AB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Lifco AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lifco AB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental indicators, Lifco AB is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Evolution and Lifco AB

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

The idea behind Evolution AB and Lifco 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.