Correlation Between Lidds AB and Mendus AB

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

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

Diversification Opportunities for Lidds AB and Mendus AB

0.36

Correlation Coefficient

Lidds AB  Mendus AB

Weak diversification

The 3 months correlation between Lidds and Mendus is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Lidds AB and Mendus AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mendus AB and Lidds AB 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 Lidds AB are associated (or correlated) with Mendus AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mendus AB has no effect on the direction of Lidds AB i.e., Lidds AB and Mendus AB go up and down completely randomly.

Pair Corralation between Lidds AB and Mendus AB

Assuming the 90 days trading horizon Lidds AB is expected to generate 3.02 times more return on investment than Mendus AB. However, Lidds AB is 3.02 times more volatile than Mendus AB. It trades about 0.03 of its potential returns per unit of risk. Mendus AB is currently generating about 0.0 per unit of risk. If you would invest  16.00  in Lidds AB on September 14, 2024 and sell it today you would lose (6.00) from holding Lidds AB or give up 37.5% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.63%
Values	Daily Returns

Lidds AB  vs.  Mendus AB

Lidds AB

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Lidds AB are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Lidds AB unveiled solid returns over the last few months and may actually be approaching a breakup point.

Mendus AB

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Mendus AB are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Mendus AB may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Lidds AB and Mendus AB

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

The idea behind Lidds AB and Mendus 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.