Correlation Between OMX Stockholm and Lagercrantz Group

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

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

Diversification Opportunities for OMX Stockholm and Lagercrantz Group

0.9

Correlation Coefficient

OMX Stockholm  Lagercrantz Group

Almost no diversification

The 3 months correlation between OMX and Lagercrantz is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding OMX Stockholm Mid and Lagercrantz Group AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lagercrantz Group and OMX Stockholm 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 OMX Stockholm Mid 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 OMX Stockholm i.e., OMX Stockholm and Lagercrantz Group go up and down completely randomly.

Pair Corralation between OMX Stockholm and Lagercrantz Group

Assuming the 90 days trading horizon OMX Stockholm is expected to generate 2.29 times less return on investment than Lagercrantz Group. But when comparing it to its historical volatility, OMX Stockholm Mid is 2.03 times less risky than Lagercrantz Group. It trades about 0.04 of its potential returns per unit of risk. Lagercrantz Group AB is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  13,119  in Lagercrantz Group AB on January 28, 2024 and sell it today you would earn a total of  2,541  from holding Lagercrantz Group AB or generate 19.37% return on investment over 90 days.

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

OMX Stockholm Mid  vs.  Lagercrantz Group AB

Pair Trading with OMX Stockholm and Lagercrantz Group

The main advantage of trading using opposite OMX Stockholm and Lagercrantz Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if OMX Stockholm 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 OMX Stockholm Mid 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.

Check out your portfolio center.

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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.