Correlation Between Carlsberg and Hvidbjerg Bank

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

By analyzing existing cross correlation between Carlsberg AS and Hvidbjerg Bank, you can compare the effects of market volatilities on Carlsberg and Hvidbjerg Bank 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 Hvidbjerg Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Carlsberg and Hvidbjerg Bank.

Diversification Opportunities for Carlsberg and Hvidbjerg Bank

-0.62

Correlation Coefficient

Carlsberg  Hvidbjerg Bank

Excellent diversification

The 3 months correlation between Carlsberg and Hvidbjerg is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Carlsberg AS and Hvidbjerg Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hvidbjerg Bank 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 Hvidbjerg Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hvidbjerg Bank has no effect on the direction of Carlsberg i.e., Carlsberg and Hvidbjerg Bank go up and down completely randomly.

Pair Corralation between Carlsberg and Hvidbjerg Bank

Assuming the 90 days trading horizon Carlsberg AS is expected to under-perform the Hvidbjerg Bank. In addition to that, Carlsberg is 1.47 times more volatile than Hvidbjerg Bank. It trades about -0.07 of its total potential returns per unit of risk. Hvidbjerg Bank is currently generating about 0.02 per unit of volatility. If you would invest  11,700  in Hvidbjerg Bank on September 3, 2024 and sell it today you would earn a total of  100.00  from holding Hvidbjerg Bank or generate 0.85% return on investment over 90 days.

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

Carlsberg AS  vs.  Hvidbjerg Bank

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 latest unfluctuating performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Hvidbjerg Bank

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Hvidbjerg Bank are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Hvidbjerg Bank is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Carlsberg and Hvidbjerg Bank

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

The idea behind Carlsberg AS and Hvidbjerg Bank 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.