Correlation Between Genmab AS and ALK Abell

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

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

Diversification Opportunities for Genmab AS and ALK Abell

0.8

Correlation Coefficient

Genmab AS  ALK Abell

Very poor diversification

The 3 months correlation between Genmab and ALK is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Genmab AS and ALK Abell AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ALK Abell AS and Genmab AS 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 Genmab AS are associated (or correlated) with ALK Abell. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ALK Abell AS has no effect on the direction of Genmab AS i.e., Genmab AS and ALK Abell go up and down completely randomly.

Pair Corralation between Genmab AS and ALK Abell

Assuming the 90 days trading horizon Genmab AS is expected to under-perform the ALK Abell. But the stock apears to be less risky and, when comparing its historical volatility, Genmab AS is 1.42 times less risky than ALK Abell. The stock trades about -0.21 of its potential returns per unit of risk. The ALK Abell AS is currently generating about -0.08 of returns per unit of risk over similar time horizon. If you would invest  18,000  in ALK Abell AS on August 31, 2024 and sell it today you would lose (2,130) from holding ALK Abell AS or give up 11.83% of portfolio value over 90 days.

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

Genmab AS  vs.  ALK Abell AS

Genmab AS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Genmab AS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in December 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

ALK Abell AS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ALK Abell AS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Genmab AS and ALK Abell

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

The idea behind Genmab AS and ALK Abell 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.