Correlation Between Indutrade and Lohilo Foods

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

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

Diversification Opportunities for Indutrade and Lohilo Foods

0.59

Correlation Coefficient

Indutrade  Lohilo Foods

Very weak diversification

The 3 months correlation between Indutrade and Lohilo is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Indutrade AB and Lohilo Foods AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lohilo Foods AB and Indutrade 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 Indutrade AB are associated (or correlated) with Lohilo Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lohilo Foods AB has no effect on the direction of Indutrade i.e., Indutrade and Lohilo Foods go up and down completely randomly.

Pair Corralation between Indutrade and Lohilo Foods

Assuming the 90 days trading horizon Indutrade AB is expected to generate 0.33 times more return on investment than Lohilo Foods. However, Indutrade AB is 3.05 times less risky than Lohilo Foods. It trades about -0.09 of its potential returns per unit of risk. Lohilo Foods AB is currently generating about -0.13 per unit of risk. If you would invest  31,160  in Indutrade AB on September 4, 2024 and sell it today you would lose (2,560) from holding Indutrade AB or give up 8.22% of portfolio value over 90 days.

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

Indutrade AB  vs.  Lohilo Foods AB

Indutrade AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Indutrade AB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain 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.

Lohilo Foods AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lohilo Foods AB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's technical indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Indutrade and Lohilo Foods

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

The idea behind Indutrade AB and Lohilo Foods 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.