Correlation Between Neinor Homes and Labiana Health

Can any of the company-specific risk be diversified away by investing in both Neinor Homes and Labiana Health 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 Neinor Homes and Labiana Health into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Neinor Homes SLU and Labiana Health SA, you can compare the effects of market volatilities on Neinor Homes and Labiana Health 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 Neinor Homes with a short position of Labiana Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Neinor Homes and Labiana Health.

Diversification Opportunities for Neinor Homes and Labiana Health

0.8

Correlation Coefficient

Neinor Homes  Labiana Health

Very poor diversification

The 3 months correlation between Neinor and Labiana is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Neinor Homes SLU and Labiana Health SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Labiana Health SA and Neinor Homes 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 Neinor Homes SLU are associated (or correlated) with Labiana Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Labiana Health SA has no effect on the direction of Neinor Homes i.e., Neinor Homes and Labiana Health go up and down completely randomly.

Pair Corralation between Neinor Homes and Labiana Health

Assuming the 90 days trading horizon Neinor Homes is expected to generate 6.46 times less return on investment than Labiana Health. But when comparing it to its historical volatility, Neinor Homes SLU is 3.11 times less risky than Labiana Health. It trades about 0.06 of its potential returns per unit of risk. Labiana Health SA is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  210.00  in Labiana Health SA on December 2, 2024 and sell it today you would earn a total of  80.00  from holding Labiana Health SA or generate 38.1% return on investment over 90 days.

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

Neinor Homes SLU  vs.  Labiana Health SA

Neinor Homes SLU

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Neinor Homes SLU are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Neinor Homes is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Labiana Health SA

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Labiana Health SA are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental drivers, Labiana Health exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Neinor Homes and Labiana Health

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

The idea behind Neinor Homes SLU and Labiana Health SA 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.