Correlation Between Lipum AB and Biovica International

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

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

Diversification Opportunities for Lipum AB and Biovica International

-0.58

Correlation Coefficient

Lipum AB  Biovica International

Excellent diversification

The 3 months correlation between Lipum and Biovica is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Lipum AB and Biovica International AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Biovica International and Lipum 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 Lipum AB are associated (or correlated) with Biovica International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Biovica International has no effect on the direction of Lipum AB i.e., Lipum AB and Biovica International go up and down completely randomly.

Pair Corralation between Lipum AB and Biovica International

Assuming the 90 days trading horizon Lipum AB is expected to generate 0.71 times more return on investment than Biovica International. However, Lipum AB is 1.4 times less risky than Biovica International. It trades about 0.11 of its potential returns per unit of risk. Biovica International AB is currently generating about 0.04 per unit of risk. If you would invest  1,220  in Lipum AB on September 13, 2024 and sell it today you would earn a total of  280.00  from holding Lipum AB or generate 22.95% return on investment over 90 days.

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

Lipum AB  vs.  Biovica International AB

Lipum AB

Risk-Adjusted Performance

8 of 100

OK

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

Biovica International

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Biovica International AB are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain forward indicators, Biovica International sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lipum AB and Biovica International

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

The idea behind Lipum AB and Biovica International 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.