Correlation Between Dantax and Vestas Wind

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

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

Diversification Opportunities for Dantax and Vestas Wind

0.62

Correlation Coefficient

Dantax  Vestas Wind

Poor diversification

The 3 months correlation between Dantax and Vestas is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Dantax 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 Dantax 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 Dantax 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 Dantax i.e., Dantax and Vestas Wind go up and down completely randomly.

Pair Corralation between Dantax and Vestas Wind

Assuming the 90 days trading horizon Dantax is expected to generate 1.21 times more return on investment than Vestas Wind. However, Dantax is 1.21 times more volatile than Vestas Wind Systems. It trades about 0.03 of its potential returns per unit of risk. Vestas Wind Systems is currently generating about -0.12 per unit of risk. If you would invest  40,800  in Dantax on September 25, 2024 and sell it today you would earn a total of  2,000  from holding Dantax or generate 4.9% return on investment over 90 days.

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

Dantax  vs.  Vestas Wind Systems

Dantax

Risk-Adjusted Performance

0 of 100

Very Weak

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

Vestas Wind Systems

Risk-Adjusted Performance

0 of 100

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 weak performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Dantax and Vestas Wind

The main advantage of trading using opposite Dantax and Vestas Wind positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dantax 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 Dantax 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.