Correlation Between Exsitec Holding and Litium AB

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

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

Diversification Opportunities for Exsitec Holding and Litium AB

0.2

Correlation Coefficient

Exsitec Holding  Litium AB

Modest diversification

The 3 months correlation between Exsitec and Litium is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Exsitec Holding AB and Litium AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Litium AB and Exsitec Holding 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 Exsitec Holding AB 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 Exsitec Holding i.e., Exsitec Holding and Litium AB go up and down completely randomly.

Pair Corralation between Exsitec Holding and Litium AB

Assuming the 90 days trading horizon Exsitec Holding AB is expected to under-perform the Litium AB. But the stock apears to be less risky and, when comparing its historical volatility, Exsitec Holding AB is 1.09 times less risky than Litium AB. The stock trades about -0.18 of its potential returns per unit of risk. The Litium AB is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  808.00  in Litium AB on October 12, 2024 and sell it today you would earn a total of  182.00  from holding Litium AB or generate 22.52% return on investment over 90 days.

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

Exsitec Holding AB  vs.  Litium AB

Exsitec Holding AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Exsitec Holding AB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private 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 Exsitec Holding and Litium AB

The main advantage of trading using opposite Exsitec Holding and Litium AB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Exsitec Holding 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 Exsitec Holding AB 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.