Correlation Between Humble Group and Lipum AB

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

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

Diversification Opportunities for Humble Group and Lipum AB

-0.74

Correlation Coefficient

Humble Group  Lipum AB

Pay attention - limited upside

The 3 months correlation between Humble and Lipum is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Humble Group AB and Lipum AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lipum AB and Humble Group 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 Humble Group AB are associated (or correlated) with Lipum AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lipum AB has no effect on the direction of Humble Group i.e., Humble Group and Lipum AB go up and down completely randomly.

Pair Corralation between Humble Group and Lipum AB

Assuming the 90 days trading horizon Humble Group AB is expected to under-perform the Lipum AB. But the stock apears to be less risky and, when comparing its historical volatility, Humble Group AB is 1.23 times less risky than Lipum AB. The stock trades about -0.03 of its potential returns per unit of risk. The Lipum AB is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  1,390  in Lipum AB on September 21, 2024 and sell it today you would lose (100.00) from holding Lipum AB or give up 7.19% of portfolio value over 90 days.

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

Humble Group AB  vs.  Lipum AB

Humble Group AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Humble Group AB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong primary indicators, Humble Group is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Lipum AB

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Humble Group and Lipum AB

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

The idea behind Humble Group AB and Lipum 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.