Correlation Between AP Møller and Bannerman Resources

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

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

Diversification Opportunities for AP Møller and Bannerman Resources

-0.56

Correlation Coefficient

AP Møller  Bannerman Resources

Excellent diversification

The 3 months correlation between DP4B and Bannerman is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding AP Mller and Bannerman Resources Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bannerman Resources and AP Møller 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 Bannerman Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bannerman Resources has no effect on the direction of AP Møller i.e., AP Møller and Bannerman Resources go up and down completely randomly.

Pair Corralation between AP Møller and Bannerman Resources

Assuming the 90 days trading horizon AP Møller is expected to generate 1.89 times less return on investment than Bannerman Resources. But when comparing it to its historical volatility, AP Mller is 1.17 times less risky than Bannerman Resources. It trades about 0.03 of its potential returns per unit of risk. Bannerman Resources Limited is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  105.00  in Bannerman Resources Limited on September 19, 2024 and sell it today you would earn a total of  69.00  from holding Bannerman Resources Limited or generate 65.71% return on investment over 90 days.

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

AP Mller   vs.  Bannerman Resources Limited

AP Møller

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in AP Mller are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, AP Møller may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Bannerman Resources

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Bannerman Resources Limited are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Bannerman Resources reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with AP Møller and Bannerman Resources

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

The idea behind AP Mller and Bannerman Resources Limited 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 Stocks Directory module to find actively traded stocks across global markets.