Correlation Between AP Mller and Fundamental Invest

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

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

Diversification Opportunities for AP Mller and Fundamental Invest

-0.5

Correlation Coefficient

AP Mller  Fundamental Invest

Very good diversification

The 3 months correlation between MAERSK-A and Fundamental is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding AP Mller and Fundamental Invest Stock in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fundamental Invest Stock and AP Mller 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 AP Mller are associated (or correlated) with Fundamental Invest. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fundamental Invest Stock has no effect on the direction of AP Mller i.e., AP Mller and Fundamental Invest go up and down completely randomly.

Pair Corralation between AP Mller and Fundamental Invest

Assuming the 90 days trading horizon AP Mller is expected to generate 2.81 times more return on investment than Fundamental Invest. However, AP Mller is 2.81 times more volatile than Fundamental Invest Stock. It trades about 0.01 of its potential returns per unit of risk. Fundamental Invest Stock is currently generating about -0.09 per unit of risk. If you would invest  1,025,000  in AP Mller on October 24, 2024 and sell it today you would lose (7,000) from holding AP Mller or give up 0.68% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.33%
Values	Daily Returns

AP Mller   vs.  Fundamental Invest Stock

AP Mller

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AP Mller has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, AP Mller is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

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 recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with AP Mller and Fundamental Invest

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

The idea behind AP Mller and Fundamental Invest Stock 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.