Correlation Between Lerøy Seafood and International Business

Can any of the company-specific risk be diversified away by investing in both Lerøy Seafood and International Business 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 International Business 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 International Business Machines, you can compare the effects of market volatilities on Lerøy Seafood and International Business 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 International Business. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lerøy Seafood and International Business.

Diversification Opportunities for Lerøy Seafood and International Business

0.61

Correlation Coefficient

Lerøy Seafood  International Business

Poor diversification

The 3 months correlation between Lerøy and International is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Lery Seafood Group and International Business Machine in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Business 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 International Business. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Business has no effect on the direction of Lerøy Seafood i.e., Lerøy Seafood and International Business go up and down completely randomly.

Pair Corralation between Lerøy Seafood and International Business

Assuming the 90 days horizon Lery Seafood Group is expected to generate 0.78 times more return on investment than International Business. However, Lery Seafood Group is 1.28 times less risky than International Business. It trades about 0.09 of its potential returns per unit of risk. International Business Machines is currently generating about 0.05 per unit of risk. If you would invest  408.00  in Lery Seafood Group on December 23, 2024 and sell it today you would earn a total of  33.00  from holding Lery Seafood Group or generate 8.09% return on investment over 90 days.

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

Lery Seafood Group  vs.  International Business Machine

Lery Seafood Group

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Lery Seafood Group are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Lerøy Seafood may actually be approaching a critical reversion point that can send shares even higher in April 2025.

International Business

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in International Business Machines are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile primary indicators, International Business may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Lerøy Seafood and International Business

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

The idea behind Lery Seafood Group and International Business Machines 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.

Check out your portfolio center.

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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.