Correlation Between Alfa Laval and DSV Panalpina

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

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

Diversification Opportunities for Alfa Laval and DSV Panalpina

0.31

Correlation Coefficient

Alfa Laval  DSV Panalpina

Weak diversification

The 3 months correlation between Alfa and DSV is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Alfa Laval AB and DSV Panalpina AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DSV Panalpina AS and Alfa Laval 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 Alfa Laval AB are associated (or correlated) with DSV Panalpina. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DSV Panalpina AS has no effect on the direction of Alfa Laval i.e., Alfa Laval and DSV Panalpina go up and down completely randomly.

Pair Corralation between Alfa Laval and DSV Panalpina

Assuming the 90 days horizon Alfa Laval AB is expected to generate 1.27 times more return on investment than DSV Panalpina. However, Alfa Laval is 1.27 times more volatile than DSV Panalpina AS. It trades about -0.03 of its potential returns per unit of risk. DSV Panalpina AS is currently generating about -0.06 per unit of risk. If you would invest  4,408  in Alfa Laval AB on September 4, 2024 and sell it today you would lose (57.00) from holding Alfa Laval AB or give up 1.29% of portfolio value over 90 days.

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

Alfa Laval AB  vs.  DSV Panalpina AS

Alfa Laval AB

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Alfa Laval AB are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Alfa Laval is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

DSV Panalpina AS

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in DSV Panalpina AS are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, DSV Panalpina showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Alfa Laval and DSV Panalpina

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

The idea behind Alfa Laval AB and DSV Panalpina AS 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.