Correlation Between AP Møller and Bollor SE

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

By analyzing existing cross correlation between AP Mller and Bollor SE, you can compare the effects of market volatilities on AP Møller and Bollor SE 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 Bollor SE. Check out your portfolio center. Please also check ongoing floating volatility patterns of AP Møller and Bollor SE.

Diversification Opportunities for AP Møller and Bollor SE

-0.13

Correlation Coefficient

AP Møller  Bollor SE

Good diversification

The 3 months correlation between DP4B and Bollor is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding AP Mller and Bollor SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bollor SE 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 Bollor SE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bollor SE has no effect on the direction of AP Møller i.e., AP Møller and Bollor SE go up and down completely randomly.

Pair Corralation between AP Møller and Bollor SE

Assuming the 90 days trading horizon AP Mller is expected to generate 1.79 times more return on investment than Bollor SE. However, AP Møller is 1.79 times more volatile than Bollor SE. It trades about 0.06 of its potential returns per unit of risk. Bollor SE is currently generating about 0.07 per unit of risk. If you would invest  162,400  in AP Mller on October 5, 2024 and sell it today you would earn a total of  3,400  from holding AP Mller or generate 2.09% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	94.44%
Values	Daily Returns

AP Mller   vs.  Bollor SE

AP Møller

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days AP Mller has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly fragile basic indicators, AP Møller reported solid returns over the last few months and may actually be approaching a breakup point.

Bollor SE

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with AP Møller and Bollor SE

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

The idea behind AP Mller and Bollor SE 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.