Correlation Between LED IBond and Ringkjoebing Landbobank

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

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

Diversification Opportunities for LED IBond and Ringkjoebing Landbobank

0.62

Correlation Coefficient

LED IBond  Ringkjoebing Landbobank

Poor diversification

The 3 months correlation between LED and Ringkjoebing is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding LED iBond International and Ringkjoebing Landbobank AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ringkjoebing Landbobank and LED IBond 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 LED iBond International 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 LED IBond i.e., LED IBond and Ringkjoebing Landbobank go up and down completely randomly.

Pair Corralation between LED IBond and Ringkjoebing Landbobank

Assuming the 90 days trading horizon LED iBond International is expected to generate 16.71 times more return on investment than Ringkjoebing Landbobank. However, LED IBond is 16.71 times more volatile than Ringkjoebing Landbobank AS. It trades about 0.1 of its potential returns per unit of risk. Ringkjoebing Landbobank AS is currently generating about 0.14 per unit of risk. If you would invest  24.00  in LED iBond International on September 22, 2024 and sell it today you would earn a total of  5.00  from holding LED iBond International or generate 20.83% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.48%
Values	Daily Returns

LED iBond International  vs.  Ringkjoebing Landbobank AS

LED iBond International

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in LED iBond International are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental drivers, LED IBond displayed solid returns over the last few months and may actually be approaching a breakup point.

Ringkjoebing Landbobank

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ringkjoebing Landbobank AS are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating fundamental indicators, Ringkjoebing Landbobank may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with LED IBond and Ringkjoebing Landbobank

The main advantage of trading using opposite LED IBond and Ringkjoebing Landbobank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LED IBond 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 LED iBond International 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.