Correlation Between Carlsberg and LED IBond

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

By analyzing existing cross correlation between Carlsberg AS and LED iBond International, you can compare the effects of market volatilities on Carlsberg and LED IBond 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 Carlsberg with a short position of LED IBond. Check out your portfolio center. Please also check ongoing floating volatility patterns of Carlsberg and LED IBond.

Diversification Opportunities for Carlsberg and LED IBond

-0.66

Correlation Coefficient

Carlsberg  LED IBond

Excellent diversification

The 3 months correlation between Carlsberg and LED is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Carlsberg AS and LED iBond International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LED iBond International and Carlsberg 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 Carlsberg AS are associated (or correlated) with LED IBond. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LED iBond International has no effect on the direction of Carlsberg i.e., Carlsberg and LED IBond go up and down completely randomly.

Pair Corralation between Carlsberg and LED IBond

Assuming the 90 days trading horizon Carlsberg AS is expected to under-perform the LED IBond. But the stock apears to be less risky and, when comparing its historical volatility, Carlsberg AS is 7.61 times less risky than LED IBond. The stock trades about -0.08 of its potential returns per unit of risk. The LED iBond International is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  34.00  in LED iBond International on October 4, 2024 and sell it today you would lose (3.00) from holding LED iBond International or give up 8.82% of portfolio value over 90 days.

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

Carlsberg AS  vs.  LED iBond International

Carlsberg AS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Carlsberg AS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

LED iBond International

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in LED iBond International are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady fundamental drivers, LED IBond displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Carlsberg and LED IBond

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

The idea behind Carlsberg AS and LED iBond International 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.