Correlation Between AP Mller and Genmab AS

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

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

Diversification Opportunities for AP Mller and Genmab AS

0.34

Correlation Coefficient

AP Mller  Genmab AS

Weak diversification

The 3 months correlation between MAERSK-A and Genmab is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding AP Mller and Genmab AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Genmab AS 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 Genmab AS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Genmab AS has no effect on the direction of AP Mller i.e., AP Mller and Genmab AS go up and down completely randomly.

Pair Corralation between AP Mller and Genmab AS

Assuming the 90 days trading horizon AP Mller is expected to generate 1.11 times more return on investment than Genmab AS. However, AP Mller is 1.11 times more volatile than Genmab AS. It trades about 0.11 of its potential returns per unit of risk. Genmab AS is currently generating about 0.04 per unit of risk. If you would invest  1,063,148  in AP Mller on December 1, 2024 and sell it today you would earn a total of  180,852  from holding AP Mller or generate 17.01% return on investment over 90 days.

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

AP Mller   vs.  Genmab AS

AP Mller

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in AP Mller are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, AP Mller sustained solid returns over the last few months and may actually be approaching a breakup point.

Genmab AS

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Genmab AS are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Genmab AS is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with AP Mller and Genmab AS

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

The idea behind AP Mller and Genmab 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.