Correlation Between Lagercrantz Group and Micro Systemation

Can any of the company-specific risk be diversified away by investing in both Lagercrantz Group and Micro Systemation 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 Micro Systemation 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 Micro Systemation AB, you can compare the effects of market volatilities on Lagercrantz Group and Micro Systemation 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 Micro Systemation. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lagercrantz Group and Micro Systemation.

Diversification Opportunities for Lagercrantz Group and Micro Systemation

0.61

Correlation Coefficient

Lagercrantz Group  Micro Systemation

Poor diversification

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

Pair Corralation between Lagercrantz Group and Micro Systemation

Assuming the 90 days trading horizon Lagercrantz Group AB is expected to generate 0.78 times more return on investment than Micro Systemation. However, Lagercrantz Group AB is 1.28 times less risky than Micro Systemation. It trades about 0.09 of its potential returns per unit of risk. Micro Systemation AB is currently generating about 0.03 per unit of risk. If you would invest  10,355  in Lagercrantz Group AB on September 30, 2024 and sell it today you would earn a total of  10,945  from holding Lagercrantz Group AB or generate 105.7% return on investment over 90 days.

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

Lagercrantz Group AB  vs.  Micro Systemation 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.

Micro Systemation

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Micro Systemation AB are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Micro Systemation is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Lagercrantz Group and Micro Systemation

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

The idea behind Lagercrantz Group AB and Micro Systemation 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.

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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.