Correlation Between LED IBond and Cemat AS

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

By analyzing existing cross correlation between LED iBond International and Cemat AS, you can compare the effects of market volatilities on LED IBond and Cemat AS 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 LED IBond with a short position of Cemat AS. Check out your portfolio center. Please also check ongoing floating volatility patterns of LED IBond and Cemat AS.

Diversification Opportunities for LED IBond and Cemat AS

-0.57

Correlation Coefficient

LED IBond  Cemat AS

Excellent diversification

The 3 months correlation between LED and Cemat is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding LED iBond International and Cemat AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cemat AS and LED IBond 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 LED iBond International are associated (or correlated) with Cemat AS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cemat AS has no effect on the direction of LED IBond i.e., LED IBond and Cemat AS go up and down completely randomly.

Pair Corralation between LED IBond and Cemat AS

Assuming the 90 days trading horizon LED iBond International is expected to generate 9.04 times more return on investment than Cemat AS. However, LED IBond is 9.04 times more volatile than Cemat AS. It trades about 0.03 of its potential returns per unit of risk. Cemat AS is currently generating about -0.06 per unit of risk. If you would invest  32.00  in LED iBond International on September 23, 2024 and sell it today you would lose (3.00) from holding LED iBond International or give up 9.38% of portfolio value over 90 days.

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

LED iBond International  vs.  Cemat AS

LED iBond International

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in LED iBond International are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental drivers, LED IBond displayed solid returns over the last few months and may actually be approaching a breakup point.

Cemat AS

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with LED IBond and Cemat AS

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

The idea behind LED iBond International and Cemat AS 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.