Correlation Between L E and Northgold

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

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

Diversification Opportunities for L E and Northgold

0.72

Correlation Coefficient

L E  Northgold

Poor diversification

The 3 months correlation between LUND-B and Northgold is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding L E Lundbergfretagen and Northgold AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northgold AB and L E 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 L E Lundbergfretagen are associated (or correlated) with Northgold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northgold AB has no effect on the direction of L E i.e., L E and Northgold go up and down completely randomly.

Pair Corralation between L E and Northgold

Assuming the 90 days trading horizon L E Lundbergfretagen is expected to generate 0.12 times more return on investment than Northgold. However, L E Lundbergfretagen is 8.29 times less risky than Northgold. It trades about -0.1 of its potential returns per unit of risk. Northgold AB is currently generating about -0.08 per unit of risk. If you would invest  56,200  in L E Lundbergfretagen on September 12, 2024 and sell it today you would lose (3,350) from holding L E Lundbergfretagen or give up 5.96% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.46%
Values	Daily Returns

L E Lundbergfretagen  vs.  Northgold AB

L E Lundbergfretagen

Risk-Adjusted Performance

0 of 100

Very Weak

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

Northgold AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Northgold AB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain 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 L E and Northgold

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

The idea behind L E Lundbergfretagen and Northgold 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..