Correlation Between HMS Networks and Lagercrantz Group

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

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

Diversification Opportunities for HMS Networks and Lagercrantz Group

-0.35

Correlation Coefficient

HMS Networks  Lagercrantz Group

Very good diversification

The 3 months correlation between HMS and Lagercrantz is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding HMS Networks 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 HMS Networks 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 HMS Networks 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 HMS Networks i.e., HMS Networks and Lagercrantz Group go up and down completely randomly.

Pair Corralation between HMS Networks and Lagercrantz Group

Assuming the 90 days trading horizon HMS Networks AB is expected to under-perform the Lagercrantz Group. In addition to that, HMS Networks is 1.51 times more volatile than Lagercrantz Group AB. It trades about -0.19 of its total potential returns per unit of risk. Lagercrantz Group AB is currently generating about 0.02 per unit of volatility. If you would invest  16,290  in Lagercrantz Group AB on February 2, 2024 and sell it today you would earn a total of  100.00  from holding Lagercrantz Group AB or generate 0.61% return on investment over 90 days.

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

HMS Networks AB  vs.  Lagercrantz Group AB

HMS Networks AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HMS Networks AB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Lagercrantz Group

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Lagercrantz Group AB are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Lagercrantz Group sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with HMS Networks and Lagercrantz Group

The main advantage of trading using opposite HMS Networks and Lagercrantz Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HMS Networks 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 HMS Networks 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.