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 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

-0.54

Correlation Coefficient

Danske Invest  LUXOR-B

Excellent diversification

The 3 months correlation between Danske and LUXOR-B is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Danske Invest 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 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 is expected to generate 2.46 times less return on investment than LUXOR-B. But when comparing it to its historical volatility, Danske Invest is 25.7 times less risky than LUXOR-B. It trades about 0.34 of its potential returns per unit of risk. Investeringsselskabet Luxor AS is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  52,000  in Investeringsselskabet Luxor AS on September 13, 2024 and sell it today you would earn a total of  3,500  from holding Investeringsselskabet Luxor AS or generate 6.73% return on investment over 90 days.

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

Danske Invest   vs.  Investeringsselskabet Luxor AS

Danske Invest

Risk-Adjusted Performance

24 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Danske Invest are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Danske Invest is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Investeringsselskabet

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Investeringsselskabet Luxor AS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, LUXOR-B is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

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 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.

Check out your portfolio center.

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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.