Correlation Between AP Mller and Asetek AS

Can any of the company-specific risk be diversified away by investing in both AP Mller and Asetek 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 Asetek 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 Asetek AS, you can compare the effects of market volatilities on AP Mller and Asetek 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 Asetek AS. Check out your portfolio center. Please also check ongoing floating volatility patterns of AP Mller and Asetek AS.

Diversification Opportunities for AP Mller and Asetek AS

0.85

Correlation Coefficient

AP Mller  Asetek AS

Very poor diversification

The 3 months correlation between MAERSK-B and Asetek is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding AP Mller and Asetek AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Asetek 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 Asetek AS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Asetek AS has no effect on the direction of AP Mller i.e., AP Mller and Asetek AS go up and down completely randomly.

Pair Corralation between AP Mller and Asetek AS

Assuming the 90 days trading horizon AP Mller is expected to generate 4.24 times less return on investment than Asetek AS. But when comparing it to its historical volatility, AP Mller is 2.23 times less risky than Asetek AS. It trades about 0.09 of its potential returns per unit of risk. Asetek AS is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  48.00  in Asetek AS on December 30, 2024 and sell it today you would earn a total of  31.00  from holding Asetek AS or generate 64.58% return on investment over 90 days.

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

AP Mller   vs.  Asetek AS

AP Mller

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in AP Mller are ranked lower than 6 (%) 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.

Asetek AS

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Asetek AS are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Asetek AS displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with AP Mller and Asetek AS

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

The idea behind AP Mller and Asetek 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.