Correlation Between Know IT and Lagercrantz Group

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

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

Diversification Opportunities for Know IT and Lagercrantz Group

0.52

Correlation Coefficient

Know IT  Lagercrantz Group

Very weak diversification

The 3 months correlation between Know and Lagercrantz is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Know IT 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 Know IT 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 Know IT 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 Know IT i.e., Know IT and Lagercrantz Group go up and down completely randomly.

Pair Corralation between Know IT and Lagercrantz Group

Assuming the 90 days trading horizon Know IT AB is expected to under-perform the Lagercrantz Group. But the stock apears to be less risky and, when comparing its historical volatility, Know IT AB is 1.57 times less risky than Lagercrantz Group. The stock trades about -0.32 of its potential returns per unit of risk. The Lagercrantz Group AB is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  16,290  in Lagercrantz Group AB on January 31, 2024 and sell it today you would earn a total of  290.00  from holding Lagercrantz Group AB or generate 1.78% return on investment over 90 days.

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

Know IT AB  vs.  Lagercrantz Group AB

Know IT AB

Risk-Adjusted Performance

1 of 100

Weak

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

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 Know IT and Lagercrantz Group

The main advantage of trading using opposite Know IT and Lagercrantz Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Know IT 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 Know IT 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.