Correlation Between Lagercrantz Group and FormPipe Software

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

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

Diversification Opportunities for Lagercrantz Group and FormPipe Software

-0.51

Correlation Coefficient

Lagercrantz Group  FormPipe Software

Excellent diversification

The 3 months correlation between Lagercrantz and FormPipe is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Lagercrantz Group AB and FormPipe Software AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FormPipe Software and Lagercrantz Group 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 Lagercrantz Group AB are associated (or correlated) with FormPipe Software. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FormPipe Software has no effect on the direction of Lagercrantz Group i.e., Lagercrantz Group and FormPipe Software go up and down completely randomly.

Pair Corralation between Lagercrantz Group and FormPipe Software

Assuming the 90 days trading horizon Lagercrantz Group AB is expected to generate 0.74 times more return on investment than FormPipe Software. However, Lagercrantz Group AB is 1.35 times less risky than FormPipe Software. It trades about 0.1 of its potential returns per unit of risk. FormPipe Software AB is currently generating about -0.06 per unit of risk. If you would invest  19,140  in Lagercrantz Group AB on September 30, 2024 and sell it today you would earn a total of  2,160  from holding Lagercrantz Group AB or generate 11.29% return on investment over 90 days.

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

Lagercrantz Group AB  vs.  FormPipe Software AB

Lagercrantz Group

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Lagercrantz Group AB are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical and fundamental indicators, Lagercrantz Group may actually be approaching a critical reversion point that can send shares even higher in January 2025.

FormPipe Software

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FormPipe Software AB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Lagercrantz Group and FormPipe Software

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

The idea behind Lagercrantz Group AB and FormPipe Software 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.