Correlation Between Modelon AB and Litium AB

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

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

Diversification Opportunities for Modelon AB and Litium AB

-0.38

Correlation Coefficient

Modelon AB  Litium AB

Very good diversification

The 3 months correlation between Modelon and Litium is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Modelon AB Cl and Litium AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Litium AB and Modelon 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 Modelon AB Cl are associated (or correlated) with Litium AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Litium AB has no effect on the direction of Modelon AB i.e., Modelon AB and Litium AB go up and down completely randomly.

Pair Corralation between Modelon AB and Litium AB

Assuming the 90 days trading horizon Modelon AB Cl is expected to under-perform the Litium AB. In addition to that, Modelon AB is 1.77 times more volatile than Litium AB. It trades about -0.02 of its total potential returns per unit of risk. Litium AB is currently generating about -0.01 per unit of volatility. If you would invest  798.00  in Litium AB on September 3, 2024 and sell it today you would lose (20.00) from holding Litium AB or give up 2.51% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

Modelon AB Cl  vs.  Litium AB

Modelon AB Cl

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Modelon AB Cl has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong technical and fundamental indicators, Modelon AB is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Litium AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Litium AB has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Pair Trading with Modelon AB and Litium AB

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

The idea behind Modelon AB Cl and Litium 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.