Correlation Between Lifco AB and Crunchfish

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

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

Diversification Opportunities for Lifco AB and Crunchfish

0.41

Correlation Coefficient

Lifco AB  Crunchfish

Very weak diversification

The 3 months correlation between Lifco and Crunchfish is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Lifco AB and Crunchfish AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Crunchfish AB and Lifco AB 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 Lifco AB are associated (or correlated) with Crunchfish. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Crunchfish AB has no effect on the direction of Lifco AB i.e., Lifco AB and Crunchfish go up and down completely randomly.

Pair Corralation between Lifco AB and Crunchfish

Assuming the 90 days trading horizon Lifco AB is expected to generate 7.01 times less return on investment than Crunchfish. But when comparing it to its historical volatility, Lifco AB is 8.04 times less risky than Crunchfish. It trades about 0.02 of its potential returns per unit of risk. Crunchfish AB is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  121.00  in Crunchfish AB on September 27, 2024 and sell it today you would lose (8.00) from holding Crunchfish AB or give up 6.61% of portfolio value over 90 days.

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

Lifco AB  vs.  Crunchfish AB

Lifco AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lifco AB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental indicators, Lifco AB is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Crunchfish AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Crunchfish AB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Lifco AB and Crunchfish

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

The idea behind Lifco AB and Crunchfish 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.