Correlation Between HusCompagniet and Broedrene

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

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

Diversification Opportunities for HusCompagniet and Broedrene

0.81

Correlation Coefficient

HusCompagniet  Broedrene

Very poor diversification

The 3 months correlation between HusCompagniet and Broedrene is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding HusCompagniet AS and Broedrene AO Johansen in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Broedrene AO Johansen and HusCompagniet 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 HusCompagniet AS are associated (or correlated) with Broedrene. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Broedrene AO Johansen has no effect on the direction of HusCompagniet i.e., HusCompagniet and Broedrene go up and down completely randomly.

Pair Corralation between HusCompagniet and Broedrene

Assuming the 90 days trading horizon HusCompagniet AS is expected to under-perform the Broedrene. In addition to that, HusCompagniet is 1.46 times more volatile than Broedrene AO Johansen. It trades about -0.13 of its total potential returns per unit of risk. Broedrene AO Johansen is currently generating about -0.14 per unit of volatility. If you would invest  8,810  in Broedrene AO Johansen on October 23, 2024 and sell it today you would lose (1,020) from holding Broedrene AO Johansen or give up 11.58% of portfolio value over 90 days.

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

HusCompagniet AS  vs.  Broedrene AO Johansen

HusCompagniet AS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HusCompagniet AS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's fundamental indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Broedrene AO Johansen

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Broedrene AO Johansen 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 HusCompagniet and Broedrene

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

The idea behind HusCompagniet AS and Broedrene AO Johansen 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 Transaction History module to view history of all your transactions and understand their impact on performance.