Correlation Between Lohilo Foods and Peab AB

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

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

Diversification Opportunities for Lohilo Foods and Peab AB

-0.36

Correlation Coefficient

Lohilo Foods  Peab AB

Very good diversification

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

Pair Corralation between Lohilo Foods and Peab AB

Assuming the 90 days trading horizon Lohilo Foods AB is expected to under-perform the Peab AB. In addition to that, Lohilo Foods is 2.54 times more volatile than Peab AB. It trades about -0.08 of its total potential returns per unit of risk. Peab AB is currently generating about 0.05 per unit of volatility. If you would invest  7,690  in Peab AB on September 16, 2024 and sell it today you would earn a total of  385.00  from holding Peab AB or generate 5.01% return on investment over 90 days.

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

Lohilo Foods AB  vs.  Peab AB

Lohilo Foods AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lohilo Foods AB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's technical indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Peab AB

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Peab AB are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Peab AB is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Lohilo Foods and Peab AB

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

The idea behind Lohilo Foods AB and Peab 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.