Correlation Between Lagercrantz Group and Prevas AB

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

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

Diversification Opportunities for Lagercrantz Group and Prevas AB

-0.7

Correlation Coefficient

Lagercrantz Group  Prevas AB

Excellent diversification

The 3 months correlation between Lagercrantz and Prevas is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Lagercrantz Group AB and Prevas AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prevas AB and Lagercrantz 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 Lagercrantz Group AB are associated (or correlated) with Prevas AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prevas AB has no effect on the direction of Lagercrantz Group i.e., Lagercrantz Group and Prevas AB go up and down completely randomly.

Pair Corralation between Lagercrantz Group and Prevas AB

Assuming the 90 days trading horizon Lagercrantz Group AB is expected to under-perform the Prevas AB. But the stock apears to be less risky and, when comparing its historical volatility, Lagercrantz Group AB is 1.42 times less risky than Prevas AB. The stock trades about -0.29 of its potential returns per unit of risk. The Prevas AB is currently generating about -0.11 of returns per unit of risk over similar time horizon. If you would invest  11,120  in Prevas AB on August 31, 2024 and sell it today you would lose (500.00) from holding Prevas AB or give up 4.5% of portfolio value over 90 days.

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

Lagercrantz Group AB  vs.  Prevas AB

Lagercrantz Group

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Lagercrantz Group AB are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong technical and fundamental indicators, Lagercrantz Group is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Prevas AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Prevas AB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's technical and fundamental indicators remain somewhat strong which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Lagercrantz Group and Prevas AB

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

The idea behind Lagercrantz Group AB and Prevas 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.