Correlation Between Investor and Loomis AB

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

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

Diversification Opportunities for Investor and Loomis AB

0.74

Correlation Coefficient

Investor  Loomis AB

Poor diversification

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

Pair Corralation between Investor and Loomis AB

Assuming the 90 days trading horizon Investor is expected to generate 3.42 times less return on investment than Loomis AB. But when comparing it to its historical volatility, Investor AB ser is 2.01 times less risky than Loomis AB. It trades about 0.1 of its potential returns per unit of risk. Loomis AB ser is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  34,140  in Loomis AB ser on December 1, 2024 and sell it today you would earn a total of  7,340  from holding Loomis AB ser or generate 21.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.33%
Values	Daily Returns

Investor AB ser  vs.  Loomis AB ser

Investor AB ser

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Investor AB ser are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Investor may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Loomis AB ser

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Loomis AB ser are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Loomis AB sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Investor and Loomis AB

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

The idea behind Investor AB ser and Loomis AB ser 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 Transaction History module to view history of all your transactions and understand their impact on performance.