Correlation Between Carlsberg and Vestas Wind

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

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

Diversification Opportunities for Carlsberg and Vestas Wind

0.26

Correlation Coefficient

Carlsberg  Vestas Wind

Modest diversification

The 3 months correlation between Carlsberg and Vestas is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Carlsberg AS and Vestas Wind Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vestas Wind Systems 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 Vestas Wind. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vestas Wind Systems has no effect on the direction of Carlsberg i.e., Carlsberg and Vestas Wind go up and down completely randomly.

Pair Corralation between Carlsberg and Vestas Wind

Assuming the 90 days trading horizon Carlsberg AS is expected to generate 0.53 times more return on investment than Vestas Wind. However, Carlsberg AS is 1.87 times less risky than Vestas Wind. It trades about 0.18 of its potential returns per unit of risk. Vestas Wind Systems is currently generating about -0.03 per unit of risk. If you would invest  75,540  in Carlsberg AS on December 2, 2024 and sell it today you would earn a total of  14,600  from holding Carlsberg AS or generate 19.33% return on investment over 90 days.

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

Carlsberg AS  vs.  Vestas Wind Systems

Carlsberg AS

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Carlsberg AS are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating basic indicators, Carlsberg sustained solid returns over the last few months and may actually be approaching a breakup point.

Vestas Wind Systems

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vestas Wind Systems has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Vestas Wind is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Carlsberg and Vestas Wind

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

The idea behind Carlsberg AS and Vestas Wind Systems 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.