Correlation Between Litium AB and Bambuser

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

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

Diversification Opportunities for Litium AB and Bambuser

0.8

Correlation Coefficient

Litium AB  Bambuser

Very poor diversification

The 3 months correlation between Litium and Bambuser is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Litium AB and Bambuser AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bambuser AB and Litium 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 Litium AB are associated (or correlated) with Bambuser. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bambuser AB has no effect on the direction of Litium AB i.e., Litium AB and Bambuser go up and down completely randomly.

Pair Corralation between Litium AB and Bambuser

Assuming the 90 days trading horizon Litium AB is expected to generate 0.3 times more return on investment than Bambuser. However, Litium AB is 3.31 times less risky than Bambuser. It trades about 0.02 of its potential returns per unit of risk. Bambuser AB is currently generating about -0.11 per unit of risk. If you would invest  782.00  in Litium AB on September 2, 2024 and sell it today you would earn a total of  6.00  from holding Litium AB or generate 0.77% return on investment over 90 days.

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

Litium AB  vs.  Bambuser AB

Litium AB

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Litium AB are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Litium AB is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Bambuser AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bambuser AB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Litium AB and Bambuser

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

The idea behind Litium AB and Bambuser 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.

Check out your portfolio center.

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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.