Correlation Between Festi Hf and Arion Banki

Can any of the company-specific risk be diversified away by investing in both Festi Hf and Arion Banki 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 Festi Hf and Arion Banki into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Festi hf and Arion banki hf, you can compare the effects of market volatilities on Festi Hf and Arion Banki 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 Festi Hf with a short position of Arion Banki. Check out your portfolio center. Please also check ongoing floating volatility patterns of Festi Hf and Arion Banki.

Diversification Opportunities for Festi Hf and Arion Banki

0.37

Correlation Coefficient

Festi Hf  Arion Banki

Weak diversification

The 3 months correlation between Festi and Arion is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Festi hf and Arion banki hf in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arion banki hf and Festi Hf 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 Festi hf are associated (or correlated) with Arion Banki. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arion banki hf has no effect on the direction of Festi Hf i.e., Festi Hf and Arion Banki go up and down completely randomly.

Pair Corralation between Festi Hf and Arion Banki

Assuming the 90 days trading horizon Festi hf is expected to generate 0.78 times more return on investment than Arion Banki. However, Festi hf is 1.28 times less risky than Arion Banki. It trades about 0.06 of its potential returns per unit of risk. Arion banki hf is currently generating about -0.06 per unit of risk. If you would invest  28,400  in Festi hf on December 30, 2024 and sell it today you would earn a total of  1,200  from holding Festi hf or generate 4.23% return on investment over 90 days.

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

Festi hf  vs.  Arion banki hf

Festi hf

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Festi hf are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong forward indicators, Festi Hf is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Arion banki hf

Risk-Adjusted Performance

Very Weak

Over the last 90 days Arion banki hf has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong forward indicators, Arion Banki is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Festi Hf and Arion Banki

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

The idea behind Festi hf and Arion banki hf 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.