Correlation Between Lime Technologies and Footway Group

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

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

Diversification Opportunities for Lime Technologies and Footway Group

0.11

Correlation Coefficient

Lime Technologies  Footway Group

Average diversification

The 3 months correlation between Lime and Footway is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Lime Technologies AB and Footway Group AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Footway Group AB and Lime Technologies 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 Lime Technologies AB are associated (or correlated) with Footway Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Footway Group AB has no effect on the direction of Lime Technologies i.e., Lime Technologies and Footway Group go up and down completely randomly.

Pair Corralation between Lime Technologies and Footway Group

Assuming the 90 days trading horizon Lime Technologies is expected to generate 2.44 times less return on investment than Footway Group. But when comparing it to its historical volatility, Lime Technologies AB is 3.99 times less risky than Footway Group. It trades about 0.12 of its potential returns per unit of risk. Footway Group AB is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  29.00  in Footway Group AB on September 2, 2024 and sell it today you would earn a total of  6.00  from holding Footway Group AB or generate 20.69% return on investment over 90 days.

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

Lime Technologies AB  vs.  Footway Group AB

Lime Technologies

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Lime Technologies AB are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Lime Technologies unveiled solid returns over the last few months and may actually be approaching a breakup point.

Footway Group AB

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Footway Group AB are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Footway Group sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lime Technologies and Footway Group

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

The idea behind Lime Technologies AB and Footway Group 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.