Correlation Between Ratos AB and L E

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

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

Diversification Opportunities for Ratos AB and L E

0.68

Correlation Coefficient

Ratos AB  L E

Poor diversification

The 3 months correlation between Ratos and LUND-B is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Ratos AB and L E Lundbergfretagen in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on L E Lundbergfretagen and Ratos AB 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 Ratos AB are associated (or correlated) with L E. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of L E Lundbergfretagen has no effect on the direction of Ratos AB i.e., Ratos AB and L E go up and down completely randomly.

Pair Corralation between Ratos AB and L E

Assuming the 90 days trading horizon Ratos AB is expected to under-perform the L E. In addition to that, Ratos AB is 1.89 times more volatile than L E Lundbergfretagen. It trades about -0.02 of its total potential returns per unit of risk. L E Lundbergfretagen is currently generating about 0.03 per unit of volatility. If you would invest  46,173  in L E Lundbergfretagen on September 4, 2024 and sell it today you would earn a total of  7,127  from holding L E Lundbergfretagen or generate 15.44% return on investment over 90 days.

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

Ratos AB  vs.  L E Lundbergfretagen

Ratos AB

Risk-Adjusted Performance

0 of 100

Very Weak

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

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.

Pair Trading with Ratos AB and L E

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

The idea behind Ratos AB and L E Lundbergfretagen 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.