Correlation Between Lammhults Design and Novotek AB

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

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

Diversification Opportunities for Lammhults Design and Novotek AB

0.62

Correlation Coefficient

Lammhults Design  Novotek AB

Poor diversification

The 3 months correlation between Lammhults and Novotek is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Lammhults Design Group and Novotek AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Novotek AB and Lammhults Design 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 Lammhults Design Group are associated (or correlated) with Novotek AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Novotek AB has no effect on the direction of Lammhults Design i.e., Lammhults Design and Novotek AB go up and down completely randomly.

Pair Corralation between Lammhults Design and Novotek AB

Assuming the 90 days trading horizon Lammhults Design Group is expected to under-perform the Novotek AB. But the stock apears to be less risky and, when comparing its historical volatility, Lammhults Design Group is 1.15 times less risky than Novotek AB. The stock trades about -0.27 of its potential returns per unit of risk. The Novotek AB is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  6,360  in Novotek AB on February 5, 2024 and sell it today you would earn a total of  260.00  from holding Novotek AB or generate 4.09% return on investment over 90 days.

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

Lammhults Design Group  vs.  Novotek AB

Lammhults Design

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Lammhults Design Group are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Lammhults Design is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Novotek AB

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Novotek AB are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Novotek AB sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lammhults Design and Novotek AB

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

The idea behind Lammhults Design Group and Novotek 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.