Correlation Between AP Mller and BankInvest Value

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

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

Diversification Opportunities for AP Mller and BankInvest Value

0.67

Correlation Coefficient

AP Mller  BankInvest Value

Poor diversification

The 3 months correlation between MAERSK-B and BankInvest is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding AP Mller and BankInvest Value Globale in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BankInvest Value Globale 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 BankInvest Value. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BankInvest Value Globale has no effect on the direction of AP Mller i.e., AP Mller and BankInvest Value go up and down completely randomly.

Pair Corralation between AP Mller and BankInvest Value

Assuming the 90 days trading horizon AP Mller is expected to generate 3.44 times more return on investment than BankInvest Value. However, AP Mller is 3.44 times more volatile than BankInvest Value Globale. It trades about 0.13 of its potential returns per unit of risk. BankInvest Value Globale is currently generating about 0.17 per unit of risk. If you would invest  982,400  in AP Mller on September 3, 2024 and sell it today you would earn a total of  215,100  from holding AP Mller or generate 21.9% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	83.08%
Values	Daily Returns

AP Mller   vs.  BankInvest Value Globale

AP Mller

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in AP Mller are ranked lower than 10 (%) 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.

BankInvest Value Globale

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in BankInvest Value Globale are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, BankInvest Value may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with AP Mller and BankInvest Value

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

The idea behind AP Mller and BankInvest Value Globale 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.