Correlation Between Arion Banki and Hampidjan

Can any of the company-specific risk be diversified away by investing in both Arion Banki and Hampidjan 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 Hampidjan 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 Hampidjan hf, you can compare the effects of market volatilities on Arion Banki and Hampidjan 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 Hampidjan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Arion Banki and Hampidjan.

Diversification Opportunities for Arion Banki and Hampidjan

0.05

Correlation Coefficient

Arion Banki  Hampidjan

Significant diversification

The 3 months correlation between Arion and Hampidjan is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Arion banki hf and Hampidjan hf in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hampidjan hf 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 Hampidjan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hampidjan hf has no effect on the direction of Arion Banki i.e., Arion Banki and Hampidjan go up and down completely randomly.

Pair Corralation between Arion Banki and Hampidjan

Assuming the 90 days trading horizon Arion banki hf is expected to generate 0.82 times more return on investment than Hampidjan. However, Arion banki hf is 1.23 times less risky than Hampidjan. It trades about 0.02 of its potential returns per unit of risk. Hampidjan hf is currently generating about 0.01 per unit of risk. If you would invest  14,613  in Arion banki hf on September 5, 2024 and sell it today you would earn a total of  1,037  from holding Arion banki hf or generate 7.1% return on investment over 90 days.

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

Arion banki hf  vs.  Hampidjan hf

Arion banki hf

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Arion banki hf are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady forward indicators, Arion Banki may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Hampidjan hf

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hampidjan hf has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, Hampidjan is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Arion Banki and Hampidjan

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

The idea behind Arion banki hf and Hampidjan hf 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.