Correlation Between Labiana Health and Neinor Homes

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

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

Diversification Opportunities for Labiana Health and Neinor Homes

-0.31

Correlation Coefficient

Labiana Health  Neinor Homes

Very good diversification

The 3 months correlation between Labiana and Neinor is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Labiana Health SA and Neinor Homes SLU in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Neinor Homes SLU and Labiana Health 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 Labiana Health SA are associated (or correlated) with Neinor Homes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Neinor Homes SLU has no effect on the direction of Labiana Health i.e., Labiana Health and Neinor Homes go up and down completely randomly.

Pair Corralation between Labiana Health and Neinor Homes

Assuming the 90 days trading horizon Labiana Health SA is expected to generate 1.31 times more return on investment than Neinor Homes. However, Labiana Health is 1.31 times more volatile than Neinor Homes SLU. It trades about -0.02 of its potential returns per unit of risk. Neinor Homes SLU is currently generating about -0.06 per unit of risk. If you would invest  302.00  in Labiana Health SA on December 30, 2024 and sell it today you would lose (12.00) from holding Labiana Health SA or give up 3.97% of portfolio value over 90 days.

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

Labiana Health SA  vs.  Neinor Homes SLU

Labiana Health SA

Risk-Adjusted Performance

Very Weak

Over the last 90 days Labiana Health SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental drivers, Labiana Health is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Neinor Homes SLU

Risk-Adjusted Performance

Very Weak

Over the last 90 days Neinor Homes SLU has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Labiana Health and Neinor Homes

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

The idea behind Labiana Health SA and Neinor Homes SLU 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.