Correlation Between Danske Invest and LUXOR-B

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

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

Diversification Opportunities for Danske Invest and LUXOR-B

-0.36

Correlation Coefficient

Danske Invest  LUXOR-B

Very good diversification

The 3 months correlation between Danske and LUXOR-B is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Danske Invest Danmark and Investeringsselskabet Luxor AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Investeringsselskabet and Danske Invest 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 Danske Invest Danmark 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 Danske Invest i.e., Danske Invest and LUXOR-B go up and down completely randomly.

Pair Corralation between Danske Invest and LUXOR-B

Assuming the 90 days trading horizon Danske Invest Danmark is expected to under-perform the LUXOR-B. But the stock apears to be less risky and, when comparing its historical volatility, Danske Invest Danmark is 2.57 times less risky than LUXOR-B. The stock trades about -0.17 of its potential returns per unit of risk. The Investeringsselskabet Luxor AS is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  58,500  in Investeringsselskabet Luxor AS on October 11, 2024 and sell it today you would earn a total of  16,500  from holding Investeringsselskabet Luxor AS or generate 28.21% return on investment over 90 days.

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

Danske Invest Danmark  vs.  Investeringsselskabet Luxor AS

Danske Invest Danmark

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Danske Invest Danmark has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Investeringsselskabet

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Investeringsselskabet Luxor AS are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating basic indicators, LUXOR-B sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Danske Invest and LUXOR-B

The main advantage of trading using opposite Danske Invest and LUXOR-B positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Danske Invest 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 Danske Invest Danmark 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.