Correlation Between Leading Edge and Boliden AB

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

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

Diversification Opportunities for Leading Edge and Boliden AB

0.29

Correlation Coefficient

Leading Edge  Boliden AB

Modest diversification

The 3 months correlation between Leading and Boliden is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Leading Edge Materials and Boliden AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boliden AB and Leading Edge 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 Leading Edge Materials are associated (or correlated) with Boliden AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Boliden AB has no effect on the direction of Leading Edge i.e., Leading Edge and Boliden AB go up and down completely randomly.

Pair Corralation between Leading Edge and Boliden AB

Assuming the 90 days trading horizon Leading Edge is expected to generate 2.43 times less return on investment than Boliden AB. In addition to that, Leading Edge is 1.58 times more volatile than Boliden AB. It trades about 0.03 of its total potential returns per unit of risk. Boliden AB is currently generating about 0.11 per unit of volatility. If you would invest  29,200  in Boliden AB on September 13, 2024 and sell it today you would earn a total of  3,960  from holding Boliden AB or generate 13.56% return on investment over 90 days.

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

Leading Edge Materials  vs.  Boliden AB

Leading Edge Materials

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Leading Edge Materials are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Leading Edge is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Boliden AB

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Boliden AB are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain essential indicators, Boliden AB unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Leading Edge and Boliden AB

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

The idea behind Leading Edge Materials and Boliden 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.