Correlation Between Bergman Beving and Arion Banki

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

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

Diversification Opportunities for Bergman Beving and Arion Banki

0.04

Correlation Coefficient

Bergman Beving  Arion Banki

Significant diversification

The 3 months correlation between Bergman and Arion is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Bergman Beving AB and Arion banki hf in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arion banki hf and Bergman Beving 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 Bergman Beving AB are associated (or correlated) with Arion Banki. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arion banki hf has no effect on the direction of Bergman Beving i.e., Bergman Beving and Arion Banki go up and down completely randomly.

Pair Corralation between Bergman Beving and Arion Banki

Assuming the 90 days trading horizon Bergman Beving AB is expected to generate 1.86 times more return on investment than Arion Banki. However, Bergman Beving is 1.86 times more volatile than Arion banki hf. It trades about 0.23 of its potential returns per unit of risk. Arion banki hf is currently generating about 0.22 per unit of risk. If you would invest  27,350  in Bergman Beving AB on September 29, 2024 and sell it today you would earn a total of  3,200  from holding Bergman Beving AB or generate 11.7% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.0%
Values	Daily Returns

Bergman Beving AB  vs.  Arion banki hf

Bergman Beving AB

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Bergman Beving AB are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Bergman Beving is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Arion banki hf

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Arion banki hf are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Arion Banki unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bergman Beving and Arion Banki

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

The idea behind Bergman Beving AB and Arion banki 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.