Correlation Between AP Mller and Alefarm Brewing

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

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

Diversification Opportunities for AP Mller and Alefarm Brewing

-0.52

Correlation Coefficient

AP Mller  Alefarm Brewing

Excellent diversification

The 3 months correlation between MAERSK-B and Alefarm is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding AP Mller and Alefarm Brewing AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alefarm Brewing 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 Alefarm Brewing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alefarm Brewing AS has no effect on the direction of AP Mller i.e., AP Mller and Alefarm Brewing go up and down completely randomly.

Pair Corralation between AP Mller and Alefarm Brewing

Assuming the 90 days trading horizon AP Mller is expected to generate 0.83 times more return on investment than Alefarm Brewing. However, AP Mller is 1.2 times less risky than Alefarm Brewing. It trades about 0.11 of its potential returns per unit of risk. Alefarm Brewing AS is currently generating about -0.03 per unit of risk. If you would invest  1,011,000  in AP Mller on September 15, 2024 and sell it today you would earn a total of  194,000  from holding AP Mller or generate 19.19% return on investment over 90 days.

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

AP Mller   vs.  Alefarm Brewing AS

AP Mller

Risk-Adjusted Performance

8 of 100

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 unsteady basic indicators, AP Mller sustained solid returns over the last few months and may actually be approaching a breakup point.

Alefarm Brewing AS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alefarm Brewing AS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong technical and fundamental indicators, Alefarm Brewing is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with AP Mller and Alefarm Brewing

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

The idea behind AP Mller and Alefarm Brewing 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.

Check out your portfolio center.

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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.