Correlation Between Generic Sweden and Litium AB

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

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

Diversification Opportunities for Generic Sweden and Litium AB

-0.37

Correlation Coefficient

Generic Sweden  Litium AB

Very good diversification

The 3 months correlation between Generic and Litium is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Generic Sweden publ and Litium AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Litium AB and Generic Sweden 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 Generic Sweden publ 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 Generic Sweden i.e., Generic Sweden and Litium AB go up and down completely randomly.

Pair Corralation between Generic Sweden and Litium AB

Assuming the 90 days trading horizon Generic Sweden publ is expected to under-perform the Litium AB. But the stock apears to be less risky and, when comparing its historical volatility, Generic Sweden publ is 1.16 times less risky than Litium AB. The stock trades about -0.05 of its potential returns per unit of risk. The Litium AB is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  750.00  in Litium AB on September 24, 2024 and sell it today you would earn a total of  14.00  from holding Litium AB or generate 1.87% return on investment over 90 days.

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

Generic Sweden publ  vs.  Litium AB

Generic Sweden publ

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Generic Sweden publ are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Generic Sweden unveiled solid returns over the last few months and may actually be approaching a breakup point.

Litium AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Litium AB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Litium AB is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Generic Sweden and Litium AB

The main advantage of trading using opposite Generic Sweden and Litium AB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Generic Sweden 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 Generic Sweden publ 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.