Correlation Between Sleep Cycle and Lime Technologies

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

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

Diversification Opportunities for Sleep Cycle and Lime Technologies

-0.4

Correlation Coefficient

Sleep Cycle  Lime Technologies

Very good diversification

The 3 months correlation between Sleep and Lime is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Sleep Cycle AB and Lime Technologies AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lime Technologies and Sleep Cycle 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 Sleep Cycle AB are associated (or correlated) with Lime Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lime Technologies has no effect on the direction of Sleep Cycle i.e., Sleep Cycle and Lime Technologies go up and down completely randomly.

Pair Corralation between Sleep Cycle and Lime Technologies

Assuming the 90 days trading horizon Sleep Cycle AB is expected to generate 1.0 times more return on investment than Lime Technologies. However, Sleep Cycle AB is 1.0 times less risky than Lime Technologies. It trades about 0.06 of its potential returns per unit of risk. Lime Technologies AB is currently generating about 0.05 per unit of risk. If you would invest  2,394  in Sleep Cycle AB on October 4, 2024 and sell it today you would earn a total of  1,366  from holding Sleep Cycle AB or generate 57.06% return on investment over 90 days.

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

Sleep Cycle AB  vs.  Lime Technologies AB

Sleep Cycle AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sleep Cycle AB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Lime Technologies

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Lime Technologies AB are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Lime Technologies may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Sleep Cycle and Lime Technologies

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

The idea behind Sleep Cycle AB and Lime Technologies 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.