Correlation Between L E and Industrivarden

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

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

Diversification Opportunities for L E and Industrivarden

0.63

Correlation Coefficient

L E  Industrivarden

Poor diversification

The 3 months correlation between LUND-B and Industrivarden is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding L E Lundbergfretagen and Industrivarden AB ser in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Industrivarden AB ser and L E 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 L E Lundbergfretagen are associated (or correlated) with Industrivarden. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Industrivarden AB ser has no effect on the direction of L E i.e., L E and Industrivarden go up and down completely randomly.

Pair Corralation between L E and Industrivarden

Assuming the 90 days trading horizon L E Lundbergfretagen is expected to under-perform the Industrivarden. But the stock apears to be less risky and, when comparing its historical volatility, L E Lundbergfretagen is 1.25 times less risky than Industrivarden. The stock trades about -0.17 of its potential returns per unit of risk. The Industrivarden AB ser is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  35,703  in Industrivarden AB ser on February 3, 2024 and sell it today you would lose (533.00) from holding Industrivarden AB ser or give up 1.49% of portfolio value over 90 days.

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

L E Lundbergfretagen  vs.  Industrivarden AB ser

L E Lundbergfretagen

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in L E Lundbergfretagen are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

Industrivarden AB ser

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Industrivarden AB ser are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Industrivarden may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with L E and Industrivarden

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

The idea behind L E Lundbergfretagen and Industrivarden AB ser 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.