Correlation Between AP Mller and Skjern Bank

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

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

Diversification Opportunities for AP Mller and Skjern Bank

0.13

Correlation Coefficient

AP Mller  Skjern Bank

Average diversification

The 3 months correlation between MAERSK-A and Skjern is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding AP Mller and Skjern Bank AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Skjern Bank 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 Skjern Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Skjern Bank AS has no effect on the direction of AP Mller i.e., AP Mller and Skjern Bank go up and down completely randomly.

Pair Corralation between AP Mller and Skjern Bank

Assuming the 90 days trading horizon AP Mller is expected to generate 1.23 times less return on investment than Skjern Bank. In addition to that, AP Mller is 1.42 times more volatile than Skjern Bank AS. It trades about 0.04 of its total potential returns per unit of risk. Skjern Bank AS is currently generating about 0.07 per unit of volatility. If you would invest  12,336  in Skjern Bank AS on December 2, 2024 and sell it today you would earn a total of  8,564  from holding Skjern Bank AS or generate 69.42% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

AP Mller   vs.  Skjern Bank 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.

Skjern Bank AS

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Skjern Bank AS are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Skjern Bank displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with AP Mller and Skjern Bank

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

The idea behind AP Mller and Skjern Bank 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.