Correlation Between Micro Systemation and Litium AB

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

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

Diversification Opportunities for Micro Systemation and Litium AB

-0.36

Correlation Coefficient

Micro Systemation  Litium AB

Very good diversification

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

Pair Corralation between Micro Systemation and Litium AB

Assuming the 90 days trading horizon Micro Systemation is expected to generate 3.11 times less return on investment than Litium AB. But when comparing it to its historical volatility, Micro Systemation AB is 1.43 times less risky than Litium AB. It trades about 0.2 of its potential returns per unit of risk. Litium AB is currently generating about 0.44 of returns per unit of risk over similar time horizon. If you would invest  770.00  in Litium AB on October 13, 2024 and sell it today you would earn a total of  220.00  from holding Litium AB or generate 28.57% return on investment over 90 days.

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

Micro Systemation AB  vs.  Litium AB

Micro Systemation

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Micro Systemation AB are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Micro Systemation sustained solid returns over the last few months and may actually be approaching a breakup point.

Litium AB

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Litium AB are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Litium AB unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Micro Systemation and Litium AB

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

The idea behind Micro Systemation AB and Litium 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.