Correlation Between Garo AB and Lime Technologies

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

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

Diversification Opportunities for Garo AB and Lime Technologies

0.41

Correlation Coefficient

Garo AB  Lime Technologies

Very weak diversification

The 3 months correlation between Garo and Lime is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Garo AB and Lime Technologies AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lime Technologies and Garo AB 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 Garo AB are associated (or correlated) with Lime Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lime Technologies has no effect on the direction of Garo AB i.e., Garo AB and Lime Technologies go up and down completely randomly.

Pair Corralation between Garo AB and Lime Technologies

Assuming the 90 days trading horizon Garo AB is expected to generate 2.31 times more return on investment than Lime Technologies. However, Garo AB is 2.31 times more volatile than Lime Technologies AB. It trades about 0.31 of its potential returns per unit of risk. Lime Technologies AB is currently generating about 0.09 per unit of risk. If you would invest  2,000  in Garo AB on October 6, 2024 and sell it today you would earn a total of  530.00  from holding Garo AB or generate 26.5% return on investment over 90 days.

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

Garo AB  vs.  Lime Technologies AB

Garo AB

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Garo AB are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Garo AB unveiled solid returns over the last few months and may actually be approaching a breakup point.

Lime Technologies

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Lime Technologies AB are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Lime Technologies may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Garo AB and Lime Technologies

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

The idea behind Garo AB and Lime Technologies 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.