Correlation Between Momentum Group and Lifco AB

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

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

Diversification Opportunities for Momentum Group and Lifco AB

0.44

Correlation Coefficient

Momentum Group  Lifco AB

Very weak diversification

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

Pair Corralation between Momentum Group and Lifco AB

Assuming the 90 days trading horizon Momentum Group AB is expected to generate 1.58 times more return on investment than Lifco AB. However, Momentum Group is 1.58 times more volatile than Lifco AB. It trades about 0.07 of its potential returns per unit of risk. Lifco AB is currently generating about 0.08 per unit of risk. If you would invest  17,040  in Momentum Group AB on September 5, 2024 and sell it today you would earn a total of  1,660  from holding Momentum Group AB or generate 9.74% return on investment over 90 days.

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

Momentum Group AB  vs.  Lifco AB

Momentum Group AB

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Momentum Group AB are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical and fundamental indicators, Momentum Group may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Lifco AB

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Lifco AB are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain fundamental indicators, Lifco AB may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Momentum Group and Lifco AB

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

The idea behind Momentum Group AB and Lifco 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.