Correlation Between Lipum AB and Bilia AB

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

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

Diversification Opportunities for Lipum AB and Bilia AB

-0.39

Correlation Coefficient

Lipum AB  Bilia AB

Very good diversification

The 3 months correlation between Lipum and Bilia is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Lipum AB and Bilia AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bilia AB and Lipum 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 Lipum AB are associated (or correlated) with Bilia AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bilia AB has no effect on the direction of Lipum AB i.e., Lipum AB and Bilia AB go up and down completely randomly.

Pair Corralation between Lipum AB and Bilia AB

Assuming the 90 days trading horizon Lipum AB is expected to under-perform the Bilia AB. In addition to that, Lipum AB is 1.25 times more volatile than Bilia AB. It trades about -0.03 of its total potential returns per unit of risk. Bilia AB is currently generating about 0.0 per unit of volatility. If you would invest  12,100  in Bilia AB on April 25, 2025 and sell it today you would lose (210.00) from holding Bilia AB or give up 1.74% of portfolio value over 90 days.

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

Lipum AB  vs.  Bilia AB

Lipum AB

Risk-Adjusted Performance

Very Weak

Over the last 90 days Lipum AB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Lipum AB is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Bilia AB

Risk-Adjusted Performance

Very Weak

Over the last 90 days Bilia AB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong essential indicators, Bilia AB is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Lipum AB and Bilia AB

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

The idea behind Lipum AB and Bilia 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.