Correlation Between H M and Lipidor Ab

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

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

Diversification Opportunities for H M and Lipidor Ab

-0.25

Correlation Coefficient

H M  Lipidor Ab

Very good diversification

The 3 months correlation between HM-B and Lipidor is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding H M Hennes and Lipidor Ab in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lipidor Ab and H M 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 H M Hennes are associated (or correlated) with Lipidor Ab. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lipidor Ab has no effect on the direction of H M i.e., H M and Lipidor Ab go up and down completely randomly.

Pair Corralation between H M and Lipidor Ab

Assuming the 90 days trading horizon H M is expected to generate 7.3 times less return on investment than Lipidor Ab. But when comparing it to its historical volatility, H M Hennes is 6.2 times less risky than Lipidor Ab. It trades about 0.03 of its potential returns per unit of risk. Lipidor Ab is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  60.00  in Lipidor Ab on October 3, 2024 and sell it today you would lose (41.00) from holding Lipidor Ab or give up 68.33% of portfolio value over 90 days.

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

H M Hennes  vs.  Lipidor Ab

H M Hennes

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days H M Hennes has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak 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.

Lipidor Ab

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Lipidor Ab are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Lipidor Ab unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with H M and Lipidor Ab

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

The idea behind H M Hennes and Lipidor 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.