Correlation Between Lerøy Seafood and ABB

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

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

Diversification Opportunities for Lerøy Seafood and ABB

0.35

Correlation Coefficient

Lerøy Seafood  ABB

Weak diversification

The 3 months correlation between Lerøy and ABB is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Lery Seafood Group and ABB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ABB and Lerøy Seafood 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 Lery Seafood Group are associated (or correlated) with ABB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ABB has no effect on the direction of Lerøy Seafood i.e., Lerøy Seafood and ABB go up and down completely randomly.

Pair Corralation between Lerøy Seafood and ABB

Assuming the 90 days horizon Lery Seafood Group is expected to under-perform the ABB. But the stock apears to be less risky and, when comparing its historical volatility, Lery Seafood Group is 1.05 times less risky than ABB. The stock trades about -0.2 of its potential returns per unit of risk. The ABB is currently generating about -0.09 of returns per unit of risk over similar time horizon. If you would invest  5,300  in ABB on September 23, 2024 and sell it today you would lose (200.00) from holding ABB or give up 3.77% of portfolio value over 90 days.

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

Lery Seafood Group  vs.  ABB

Lery Seafood Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lery Seafood Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Lerøy Seafood is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

ABB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ABB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable forward-looking indicators, ABB is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Lerøy Seafood and ABB

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

The idea behind Lery Seafood Group and ABB 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.