Correlation Between Leading Edge and Swedencare Publ

Can any of the company-specific risk be diversified away by investing in both Leading Edge and Swedencare Publ 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 Swedencare Publ 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 Swedencare publ AB, you can compare the effects of market volatilities on Leading Edge and Swedencare Publ 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 Swedencare Publ. Check out your portfolio center. Please also check ongoing floating volatility patterns of Leading Edge and Swedencare Publ.

Diversification Opportunities for Leading Edge and Swedencare Publ

-0.59

Correlation Coefficient

Leading Edge  Swedencare Publ

Excellent diversification

The 3 months correlation between Leading and Swedencare is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Leading Edge Materials and Swedencare publ AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Swedencare publ 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 Swedencare Publ. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Swedencare publ AB has no effect on the direction of Leading Edge i.e., Leading Edge and Swedencare Publ go up and down completely randomly.

Pair Corralation between Leading Edge and Swedencare Publ

Assuming the 90 days trading horizon Leading Edge Materials is expected to generate 2.21 times more return on investment than Swedencare Publ. However, Leading Edge is 2.21 times more volatile than Swedencare publ AB. It trades about -0.06 of its potential returns per unit of risk. Swedencare publ AB is currently generating about -0.19 per unit of risk. If you would invest  77.00  in Leading Edge Materials on October 4, 2024 and sell it today you would lose (4.00) from holding Leading Edge Materials or give up 5.19% of portfolio value over 90 days.

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

Leading Edge Materials  vs.  Swedencare publ AB

Leading Edge Materials

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Leading Edge Materials has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Swedencare publ AB

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Swedencare publ AB are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain fundamental indicators, Swedencare Publ sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Leading Edge and Swedencare Publ

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

The idea behind Leading Edge Materials and Swedencare publ 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.

Check out your portfolio center.

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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.