Correlation Between NIBE Industrier and Lennox International

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

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

Diversification Opportunities for NIBE Industrier and Lennox International

-0.33

Correlation Coefficient

NIBE Industrier  Lennox International

Very good diversification

The 3 months correlation between NIBE and Lennox is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding NIBE Industrier AB and Lennox International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lennox International and NIBE Industrier 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 NIBE Industrier AB are associated (or correlated) with Lennox International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lennox International has no effect on the direction of NIBE Industrier i.e., NIBE Industrier and Lennox International go up and down completely randomly.

Pair Corralation between NIBE Industrier and Lennox International

Assuming the 90 days horizon NIBE Industrier AB is expected to under-perform the Lennox International. In addition to that, NIBE Industrier is 2.12 times more volatile than Lennox International. It trades about -0.11 of its total potential returns per unit of risk. Lennox International is currently generating about 0.06 per unit of volatility. If you would invest  62,418  in Lennox International on October 21, 2024 and sell it today you would earn a total of  2,328  from holding Lennox International or generate 3.73% return on investment over 90 days.

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

NIBE Industrier AB  vs.  Lennox International

NIBE Industrier AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NIBE Industrier AB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's fundamental drivers remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Lennox International

Risk-Adjusted Performance

6 of 100

Modest

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

Pair Trading with NIBE Industrier and Lennox International

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

The idea behind NIBE Industrier AB and Lennox International 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.