Correlation Between HusCompagniet and Dampskibsselskabet

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

By analyzing existing cross correlation between HusCompagniet AS and Dampskibsselskabet Norden AS, you can compare the effects of market volatilities on HusCompagniet and Dampskibsselskabet 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 Dampskibsselskabet. Check out your portfolio center. Please also check ongoing floating volatility patterns of HusCompagniet and Dampskibsselskabet.

Diversification Opportunities for HusCompagniet and Dampskibsselskabet

0.84

Correlation Coefficient

HusCompagniet  Dampskibsselskabet

Very poor diversification

The 3 months correlation between HusCompagniet and Dampskibsselskabet is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding HusCompagniet AS and Dampskibsselskabet Norden AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dampskibsselskabet 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 Dampskibsselskabet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dampskibsselskabet has no effect on the direction of HusCompagniet i.e., HusCompagniet and Dampskibsselskabet go up and down completely randomly.

Pair Corralation between HusCompagniet and Dampskibsselskabet

Assuming the 90 days trading horizon HusCompagniet AS is expected to generate 0.93 times more return on investment than Dampskibsselskabet. However, HusCompagniet AS is 1.08 times less risky than Dampskibsselskabet. It trades about -0.05 of its potential returns per unit of risk. Dampskibsselskabet Norden AS is currently generating about -0.13 per unit of risk. If you would invest  6,320  in HusCompagniet AS on October 9, 2024 and sell it today you would lose (480.00) from holding HusCompagniet AS or give up 7.59% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.33%
Values	Daily Returns

HusCompagniet AS  vs.  Dampskibsselskabet Norden AS

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 latest unsteady 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.

Dampskibsselskabet

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dampskibsselskabet Norden 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 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.

Pair Trading with HusCompagniet and Dampskibsselskabet

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

The idea behind HusCompagniet AS and Dampskibsselskabet Norden 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.