Correlation Between Fundamental Invest and LUXOR-B

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

By analyzing existing cross correlation between Fundamental Invest Stock and Investeringsselskabet Luxor AS, you can compare the effects of market volatilities on Fundamental Invest and LUXOR-B 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 Fundamental Invest with a short position of LUXOR-B. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fundamental Invest and LUXOR-B.

Diversification Opportunities for Fundamental Invest and LUXOR-B

-0.09

Correlation Coefficient

Fundamental Invest  LUXOR-B

Good diversification

The 3 months correlation between Fundamental and LUXOR-B is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Fundamental Invest Stock and Investeringsselskabet Luxor AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Investeringsselskabet and Fundamental Invest 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 Fundamental Invest Stock are associated (or correlated) with LUXOR-B. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Investeringsselskabet has no effect on the direction of Fundamental Invest i.e., Fundamental Invest and LUXOR-B go up and down completely randomly.

Pair Corralation between Fundamental Invest and LUXOR-B

Assuming the 90 days trading horizon Fundamental Invest Stock is expected to under-perform the LUXOR-B. But the stock apears to be less risky and, when comparing its historical volatility, Fundamental Invest Stock is 2.46 times less risky than LUXOR-B. The stock trades about -0.08 of its potential returns per unit of risk. The Investeringsselskabet Luxor AS is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  58,500  in Investeringsselskabet Luxor AS on October 8, 2024 and sell it today you would earn a total of  13,000  from holding Investeringsselskabet Luxor AS or generate 22.22% return on investment over 90 days.

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

Fundamental Invest Stock  vs.  Investeringsselskabet Luxor AS

Fundamental Invest Stock

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fundamental Invest Stock has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, Fundamental Invest is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Investeringsselskabet

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Investeringsselskabet Luxor AS are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating basic indicators, LUXOR-B sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Fundamental Invest and LUXOR-B

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

The idea behind Fundamental Invest Stock and Investeringsselskabet Luxor 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.