Correlation Between FLSmidth and Ringkjoebing Landbobank

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

By analyzing existing cross correlation between FLSmidth Co and Ringkjoebing Landbobank AS, you can compare the effects of market volatilities on FLSmidth and Ringkjoebing Landbobank 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 FLSmidth with a short position of Ringkjoebing Landbobank. Check out your portfolio center. Please also check ongoing floating volatility patterns of FLSmidth and Ringkjoebing Landbobank.

Diversification Opportunities for FLSmidth and Ringkjoebing Landbobank

0.58

Correlation Coefficient

FLSmidth  Ringkjoebing Landbobank

Very weak diversification

The 3 months correlation between FLSmidth and Ringkjoebing is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding FLSmidth Co and Ringkjoebing Landbobank AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ringkjoebing Landbobank and FLSmidth 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 FLSmidth Co are associated (or correlated) with Ringkjoebing Landbobank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ringkjoebing Landbobank has no effect on the direction of FLSmidth i.e., FLSmidth and Ringkjoebing Landbobank go up and down completely randomly.

Pair Corralation between FLSmidth and Ringkjoebing Landbobank

Assuming the 90 days trading horizon FLSmidth Co is expected to generate 1.29 times more return on investment than Ringkjoebing Landbobank. However, FLSmidth is 1.29 times more volatile than Ringkjoebing Landbobank AS. It trades about 0.16 of its potential returns per unit of risk. Ringkjoebing Landbobank AS is currently generating about 0.17 per unit of risk. If you would invest  32,520  in FLSmidth Co on September 12, 2024 and sell it today you would earn a total of  5,460  from holding FLSmidth Co or generate 16.79% return on investment over 90 days.

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

FLSmidth Co  vs.  Ringkjoebing Landbobank AS

FLSmidth

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in FLSmidth Co are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, FLSmidth displayed solid returns over the last few months and may actually be approaching a breakup point.

Ringkjoebing Landbobank

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ringkjoebing Landbobank AS are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating fundamental indicators, Ringkjoebing Landbobank exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with FLSmidth and Ringkjoebing Landbobank

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

The idea behind FLSmidth Co and Ringkjoebing Landbobank 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.

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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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.