Correlation Between KABE Group and Lidds AB

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

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

Diversification Opportunities for KABE Group and Lidds AB

0.24

Correlation Coefficient

KABE Group  Lidds AB

Modest diversification

The 3 months correlation between KABE and Lidds is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding KABE Group AB and Lidds AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lidds AB and KABE 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 KABE Group AB are associated (or correlated) with Lidds AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lidds AB has no effect on the direction of KABE Group i.e., KABE Group and Lidds AB go up and down completely randomly.

Pair Corralation between KABE Group and Lidds AB

Assuming the 90 days trading horizon KABE Group is expected to generate 46.0 times less return on investment than Lidds AB. But when comparing it to its historical volatility, KABE Group AB is 10.31 times less risky than Lidds AB. It trades about 0.06 of its potential returns per unit of risk. Lidds AB is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest  10.00  in Lidds AB on October 22, 2024 and sell it today you would earn a total of  5.00  from holding Lidds AB or generate 50.0% return on investment over 90 days.

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

KABE Group AB  vs.  Lidds AB

KABE Group AB

Risk-Adjusted Performance

0 of 100

Very Weak

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

Lidds AB

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Lidds AB are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Lidds AB unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with KABE Group and Lidds AB

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

The idea behind KABE Group AB and Lidds 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..