Correlation Between Micro Systemation and Lagercrantz Group

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

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

Diversification Opportunities for Micro Systemation and Lagercrantz Group

0.61

Correlation Coefficient

Micro Systemation  Lagercrantz Group

Poor diversification

The 3 months correlation between Micro and Lagercrantz is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Micro Systemation AB and Lagercrantz Group AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lagercrantz Group and Micro Systemation 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 Micro Systemation AB are associated (or correlated) with Lagercrantz Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lagercrantz Group has no effect on the direction of Micro Systemation i.e., Micro Systemation and Lagercrantz Group go up and down completely randomly.

Pair Corralation between Micro Systemation and Lagercrantz Group

Assuming the 90 days trading horizon Micro Systemation is expected to generate 2.87 times less return on investment than Lagercrantz Group. In addition to that, Micro Systemation is 1.2 times more volatile than Lagercrantz Group AB. It trades about 0.03 of its total potential returns per unit of risk. Lagercrantz Group AB is currently generating about 0.11 per unit of volatility. If you would invest  19,140  in Lagercrantz Group AB on September 29, 2024 and sell it today you would earn a total of  2,160  from holding Lagercrantz Group AB or generate 11.29% return on investment over 90 days.

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

Micro Systemation AB  vs.  Lagercrantz Group AB

Micro Systemation

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Micro Systemation AB are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Micro Systemation is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Lagercrantz Group

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Lagercrantz Group AB are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical and fundamental indicators, Lagercrantz Group may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Micro Systemation and Lagercrantz Group

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

The idea behind Micro Systemation AB and Lagercrantz 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.