Correlation Between GOODYEAR T and Atrium Ljungberg

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

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

Diversification Opportunities for GOODYEAR T and Atrium Ljungberg

-0.54

Correlation Coefficient

GOODYEAR T  Atrium Ljungberg

Excellent diversification

The 3 months correlation between GOODYEAR and Atrium is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding GOODYEAR T RUBBER and Atrium Ljungberg AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Atrium Ljungberg and GOODYEAR T 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 GOODYEAR T RUBBER are associated (or correlated) with Atrium Ljungberg. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Atrium Ljungberg has no effect on the direction of GOODYEAR T i.e., GOODYEAR T and Atrium Ljungberg go up and down completely randomly.

Pair Corralation between GOODYEAR T and Atrium Ljungberg

Assuming the 90 days trading horizon GOODYEAR T RUBBER is expected to under-perform the Atrium Ljungberg. In addition to that, GOODYEAR T is 1.95 times more volatile than Atrium Ljungberg AB. It trades about -0.23 of its total potential returns per unit of risk. Atrium Ljungberg AB is currently generating about 0.06 per unit of volatility. If you would invest  1,704  in Atrium Ljungberg AB on October 6, 2024 and sell it today you would earn a total of  22.00  from holding Atrium Ljungberg AB or generate 1.29% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	94.44%
Values	Daily Returns

GOODYEAR T RUBBER  vs.  Atrium Ljungberg AB

GOODYEAR T RUBBER

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in GOODYEAR T RUBBER are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, GOODYEAR T unveiled solid returns over the last few months and may actually be approaching a breakup point.

Atrium Ljungberg

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Atrium Ljungberg AB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with GOODYEAR T and Atrium Ljungberg

The main advantage of trading using opposite GOODYEAR T and Atrium Ljungberg positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GOODYEAR T position performs unexpectedly, Atrium Ljungberg 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 Atrium Ljungberg will offset losses from the drop in Atrium Ljungberg's long position.

The idea behind GOODYEAR T RUBBER and Atrium Ljungberg 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.