Correlation Between Lipum AB and BillerudKorsnas

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

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

Diversification Opportunities for Lipum AB and BillerudKorsnas

-0.44

Correlation Coefficient

Lipum AB  BillerudKorsnas

Very good diversification

The 3 months correlation between Lipum and BillerudKorsnas is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Lipum AB and BillerudKorsnas AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BillerudKorsnas AB and Lipum 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 Lipum AB are associated (or correlated) with BillerudKorsnas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BillerudKorsnas AB has no effect on the direction of Lipum AB i.e., Lipum AB and BillerudKorsnas go up and down completely randomly.

Pair Corralation between Lipum AB and BillerudKorsnas

Assuming the 90 days trading horizon Lipum AB is expected to generate 1.7 times more return on investment than BillerudKorsnas. However, Lipum AB is 1.7 times more volatile than BillerudKorsnas AB. It trades about 0.1 of its potential returns per unit of risk. BillerudKorsnas AB is currently generating about -0.08 per unit of risk. If you would invest  1,170  in Lipum AB on September 2, 2024 and sell it today you would earn a total of  260.00  from holding Lipum AB or generate 22.22% return on investment over 90 days.

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

Lipum AB  vs.  BillerudKorsnas AB

Lipum AB

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Lipum AB are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Lipum AB unveiled solid returns over the last few months and may actually be approaching a breakup point.

BillerudKorsnas AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BillerudKorsnas AB 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.

Pair Trading with Lipum AB and BillerudKorsnas

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

The idea behind Lipum AB and BillerudKorsnas 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.