Correlation Between Axfood AB and Lea Bank

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

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

Diversification Opportunities for Axfood AB and Lea Bank

-0.21

Correlation Coefficient

Axfood AB  Lea Bank

Very good diversification

The 3 months correlation between Axfood and Lea is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Axfood AB and Lea Bank AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lea Bank AB and Axfood 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 Axfood AB are associated (or correlated) with Lea Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lea Bank AB has no effect on the direction of Axfood AB i.e., Axfood AB and Lea Bank go up and down completely randomly.

Pair Corralation between Axfood AB and Lea Bank

Assuming the 90 days trading horizon Axfood AB is expected to generate 0.44 times more return on investment than Lea Bank. However, Axfood AB is 2.27 times less risky than Lea Bank. It trades about 0.21 of its potential returns per unit of risk. Lea Bank AB is currently generating about 0.01 per unit of risk. If you would invest  24,910  in Axfood AB on April 20, 2025 and sell it today you would earn a total of  3,770  from holding Axfood AB or generate 15.13% return on investment over 90 days.

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

Axfood AB  vs.  Lea Bank AB

Axfood AB

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Axfood AB are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Axfood AB unveiled solid returns over the last few months and may actually be approaching a breakup point.

Lea Bank AB

Risk-Adjusted Performance

Very Weak

Over the last 90 days Lea Bank AB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Lea Bank 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 Axfood AB and Lea Bank

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

The idea behind Axfood AB and Lea Bank 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.