Correlation Between LUXOR-B and FOM Technologies

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

By analyzing existing cross correlation between Investeringsselskabet Luxor AS and FOM Technologies AS, you can compare the effects of market volatilities on LUXOR-B and FOM Technologies 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 LUXOR-B with a short position of FOM Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of LUXOR-B and FOM Technologies.

Diversification Opportunities for LUXOR-B and FOM Technologies

0.57

Correlation Coefficient

LUXOR-B  FOM Technologies

Very weak diversification

The 3 months correlation between LUXOR-B and FOM is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Investeringsselskabet Luxor AS and FOM Technologies AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FOM Technologies and LUXOR-B 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 Investeringsselskabet Luxor AS are associated (or correlated) with FOM Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FOM Technologies has no effect on the direction of LUXOR-B i.e., LUXOR-B and FOM Technologies go up and down completely randomly.

Pair Corralation between LUXOR-B and FOM Technologies

Assuming the 90 days trading horizon Investeringsselskabet Luxor AS is expected to under-perform the FOM Technologies. But the stock apears to be less risky and, when comparing its historical volatility, Investeringsselskabet Luxor AS is 1.48 times less risky than FOM Technologies. The stock trades about -0.16 of its potential returns per unit of risk. The FOM Technologies AS is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  1,000.00  in FOM Technologies AS on September 14, 2024 and sell it today you would lose (34.00) from holding FOM Technologies AS or give up 3.4% of portfolio value over 90 days.

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

Investeringsselskabet Luxor AS  vs.  FOM Technologies AS

Investeringsselskabet

Risk-Adjusted Performance

0 of 100

Very Weak

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

FOM Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FOM Technologies AS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's primary indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with LUXOR-B and FOM Technologies

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

The idea behind Investeringsselskabet Luxor AS and FOM Technologies AS 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.