Correlation Between AP Mller and Clarkson PLC

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

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

Diversification Opportunities for AP Mller and Clarkson PLC

-0.34

Correlation Coefficient

AP Mller  Clarkson PLC

Very good diversification

The 3 months correlation between DP4B and Clarkson is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding AP Mller and Clarkson PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Clarkson PLC and AP Mller 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 AP Mller are associated (or correlated) with Clarkson PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Clarkson PLC has no effect on the direction of AP Mller i.e., AP Mller and Clarkson PLC go up and down completely randomly.

Pair Corralation between AP Mller and Clarkson PLC

Assuming the 90 days trading horizon AP Mller is expected to generate 2.17 times more return on investment than Clarkson PLC. However, AP Mller is 2.17 times more volatile than Clarkson PLC. It trades about 0.02 of its potential returns per unit of risk. Clarkson PLC is currently generating about 0.05 per unit of risk. If you would invest  135,547  in AP Mller on November 20, 2024 and sell it today you would earn a total of  21,703  from holding AP Mller or generate 16.01% return on investment over 90 days.

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

AP Mller   vs.  Clarkson PLC

AP Mller

Risk-Adjusted Performance

Very Weak

Over the last 90 days AP Mller has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, AP Mller is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Clarkson PLC

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Clarkson PLC are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Clarkson PLC reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with AP Mller and Clarkson PLC

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

The idea behind AP Mller and Clarkson PLC 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.