Correlation Between Addnode Group and Lagercrantz Group

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

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

Diversification Opportunities for Addnode Group and Lagercrantz Group

0.77

Correlation Coefficient

Addnode Group  Lagercrantz Group

Poor diversification

The 3 months correlation between Addnode and Lagercrantz is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Addnode Group 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 Addnode Group 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 Addnode Group 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 Addnode Group i.e., Addnode Group and Lagercrantz Group go up and down completely randomly.

Pair Corralation between Addnode Group and Lagercrantz Group

Assuming the 90 days trading horizon Addnode Group is expected to generate 1.98 times less return on investment than Lagercrantz Group. In addition to that, Addnode Group is 1.21 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 0.07 per unit of volatility. If you would invest  8,196  in Lagercrantz Group AB on January 31, 2024 and sell it today you would earn a total of  8,384  from holding Lagercrantz Group AB or generate 102.29% return on investment over 90 days.

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

Addnode Group AB  vs.  Lagercrantz Group AB

Addnode Group AB

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Addnode Group AB are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Addnode Group sustained solid returns over the last few months and may actually be approaching a breakup point.

Lagercrantz Group

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Lagercrantz Group AB are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Lagercrantz Group sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Addnode Group and Lagercrantz Group

The main advantage of trading using opposite Addnode Group and Lagercrantz Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Addnode Group 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 Addnode Group 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.