Correlation Between Arion Banki and Real Heart

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

By analyzing existing cross correlation between Arion banki hf and Real Heart, you can compare the effects of market volatilities on Arion Banki and Real Heart 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 Arion Banki with a short position of Real Heart. Check out your portfolio center. Please also check ongoing floating volatility patterns of Arion Banki and Real Heart.

Diversification Opportunities for Arion Banki and Real Heart

-0.8

Correlation Coefficient

Arion Banki  Real Heart

Pay attention - limited upside

The 3 months correlation between Arion and Real is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Arion banki hf and Real Heart in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Real Heart and Arion Banki 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 Arion banki hf are associated (or correlated) with Real Heart. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Real Heart has no effect on the direction of Arion Banki i.e., Arion Banki and Real Heart go up and down completely randomly.

Pair Corralation between Arion Banki and Real Heart

Assuming the 90 days trading horizon Arion banki hf is expected to generate 0.37 times more return on investment than Real Heart. However, Arion banki hf is 2.68 times less risky than Real Heart. It trades about 0.17 of its potential returns per unit of risk. Real Heart is currently generating about -0.19 per unit of risk. If you would invest  1,055  in Arion banki hf on September 12, 2024 and sell it today you would earn a total of  200.00  from holding Arion banki hf or generate 18.96% return on investment over 90 days.

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

Arion banki hf  vs.  Real Heart

Arion banki hf

Risk-Adjusted Performance

13 of 100

Good

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

Real Heart

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Real Heart has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Arion Banki and Real Heart

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

The idea behind Arion banki hf and Real Heart 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.