Correlation Between BankInvest Optima and LUXOR-B

Can any of the company-specific risk be diversified away by investing in both BankInvest Optima and LUXOR-B 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 BankInvest Optima and LUXOR-B into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between BankInvest Optima 30 and Investeringsselskabet Luxor AS, you can compare the effects of market volatilities on BankInvest Optima and LUXOR-B 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 BankInvest Optima with a short position of LUXOR-B. Check out your portfolio center. Please also check ongoing floating volatility patterns of BankInvest Optima and LUXOR-B.

Diversification Opportunities for BankInvest Optima and LUXOR-B

-0.48

Correlation Coefficient

BankInvest Optima  LUXOR-B

Very good diversification

The 3 months correlation between BankInvest and LUXOR-B is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding BankInvest Optima 30 and Investeringsselskabet Luxor AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Investeringsselskabet and BankInvest Optima 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 BankInvest Optima 30 are associated (or correlated) with LUXOR-B. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Investeringsselskabet has no effect on the direction of BankInvest Optima i.e., BankInvest Optima and LUXOR-B go up and down completely randomly.

Pair Corralation between BankInvest Optima and LUXOR-B

Assuming the 90 days trading horizon BankInvest Optima is expected to generate 20.24 times less return on investment than LUXOR-B. But when comparing it to its historical volatility, BankInvest Optima 30 is 5.98 times less risky than LUXOR-B. It trades about 0.04 of its potential returns per unit of risk. Investeringsselskabet Luxor AS is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  58,000  in Investeringsselskabet Luxor AS on September 22, 2024 and sell it today you would earn a total of  3,000  from holding Investeringsselskabet Luxor AS or generate 5.17% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.65%
Values	Daily Returns

BankInvest Optima 30  vs.  Investeringsselskabet Luxor AS

BankInvest Optima

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BankInvest Optima 30 are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, BankInvest Optima is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Investeringsselskabet

Risk-Adjusted Performance

2 of 100

Weak

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

Pair Trading with BankInvest Optima and LUXOR-B

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

The idea behind BankInvest Optima 30 and Investeringsselskabet Luxor 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.

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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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.