Correlation Between Lea Bank and ALM Equity

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

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

Diversification Opportunities for Lea Bank and ALM Equity

-0.71

Correlation Coefficient

Lea Bank  ALM Equity

Pay attention - limited upside

The 3 months correlation between Lea and ALM is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Lea Bank AB and ALM Equity AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ALM Equity AB and Lea Bank 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 Lea Bank AB are associated (or correlated) with ALM Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ALM Equity AB has no effect on the direction of Lea Bank i.e., Lea Bank and ALM Equity go up and down completely randomly.

Pair Corralation between Lea Bank and ALM Equity

Assuming the 90 days trading horizon Lea Bank is expected to generate 5.25 times less return on investment than ALM Equity. In addition to that, Lea Bank is 4.53 times more volatile than ALM Equity AB. It trades about 0.01 of its total potential returns per unit of risk. ALM Equity AB is currently generating about 0.15 per unit of volatility. If you would invest  7,855  in ALM Equity AB on April 22, 2025 and sell it today you would earn a total of  415.00  from holding ALM Equity AB or generate 5.28% return on investment over 90 days.

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

Lea Bank AB  vs.  ALM Equity AB

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.

ALM Equity AB

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ALM Equity AB are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, ALM Equity is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Lea Bank and ALM Equity

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

The idea behind Lea Bank AB and ALM Equity 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 Transaction History module to view history of all your transactions and understand their impact on performance.