Correlation Between Leading Edge and Neola Medical

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

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

Diversification Opportunities for Leading Edge and Neola Medical

0.36

Correlation Coefficient

Leading Edge  Neola Medical

Weak diversification

The 3 months correlation between Leading and Neola is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Leading Edge Materials and Neola Medical AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Neola Medical AB and Leading Edge 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 Leading Edge Materials are associated (or correlated) with Neola Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Neola Medical AB has no effect on the direction of Leading Edge i.e., Leading Edge and Neola Medical go up and down completely randomly.

Pair Corralation between Leading Edge and Neola Medical

Assuming the 90 days trading horizon Leading Edge Materials is expected to generate 1.83 times more return on investment than Neola Medical. However, Leading Edge is 1.83 times more volatile than Neola Medical AB. It trades about 0.27 of its potential returns per unit of risk. Neola Medical AB is currently generating about 0.12 per unit of risk. If you would invest  72.00  in Leading Edge Materials on December 24, 2024 and sell it today you would earn a total of  143.00  from holding Leading Edge Materials or generate 198.61% return on investment over 90 days.

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

Leading Edge Materials  vs.  Neola Medical AB

Leading Edge Materials

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Leading Edge Materials are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Leading Edge unveiled solid returns over the last few months and may actually be approaching a breakup point.

Neola Medical AB

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Neola Medical AB are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Neola Medical unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Leading Edge and Neola Medical

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

The idea behind Leading Edge Materials and Neola Medical 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.