Correlation Between Lipum AB and Boliden AB

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

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

Diversification Opportunities for Lipum AB and Boliden AB

0.2

Correlation Coefficient

Lipum AB  Boliden AB

Modest diversification

The 3 months correlation between Lipum and Boliden is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Lipum AB and Boliden AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boliden AB 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 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 Lipum AB i.e., Lipum AB and Boliden AB go up and down completely randomly.

Pair Corralation between Lipum AB and Boliden AB

Assuming the 90 days trading horizon Lipum AB is expected to generate 1.82 times more return on investment than Boliden AB. However, Lipum AB is 1.82 times more volatile than Boliden AB. It trades about 0.12 of its potential returns per unit of risk. Boliden AB is currently generating about 0.09 per unit of risk. If you would invest  1,160  in Lipum AB on September 14, 2024 and sell it today you would earn a total of  300.00  from holding Lipum AB or generate 25.86% return on investment over 90 days.

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

Lipum AB  vs.  Boliden AB

Lipum AB

Risk-Adjusted Performance

9 of 100

OK

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

Boliden AB

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Boliden AB are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak essential indicators, Boliden AB may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Lipum AB and Boliden AB

The main advantage of trading using opposite Lipum AB and Boliden AB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lipum AB 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 Lipum AB 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.