Correlation Between MIPS AB and Lime Technologies

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

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

Diversification Opportunities for MIPS AB and Lime Technologies

-0.17

Correlation Coefficient

MIPS AB  Lime Technologies

Good diversification

The 3 months correlation between MIPS and Lime is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding MIPS AB and Lime Technologies AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lime Technologies and MIPS 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 MIPS AB are associated (or correlated) with Lime Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lime Technologies has no effect on the direction of MIPS AB i.e., MIPS AB and Lime Technologies go up and down completely randomly.

Pair Corralation between MIPS AB and Lime Technologies

Assuming the 90 days trading horizon MIPS AB is expected to generate 0.85 times more return on investment than Lime Technologies. However, MIPS AB is 1.17 times less risky than Lime Technologies. It trades about 0.13 of its potential returns per unit of risk. Lime Technologies AB is currently generating about -0.06 per unit of risk. If you would invest  36,024  in MIPS AB on February 9, 2024 and sell it today you would earn a total of  3,176  from holding MIPS AB or generate 8.82% return on investment over 90 days.

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

MIPS AB  vs.  Lime Technologies AB

MIPS AB

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in MIPS AB are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, MIPS AB unveiled solid returns over the last few months and may actually be approaching a breakup point.

Lime Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with MIPS AB and Lime Technologies

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

The idea behind MIPS AB and Lime Technologies 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.