Correlation Between AP Mller and Nordea Invest

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

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

Diversification Opportunities for AP Mller and Nordea Invest

0.5

Correlation Coefficient

AP Mller  Nordea Invest

Very weak diversification

The 3 months correlation between MAERSK-B and Nordea is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding AP Mller and Nordea Invest Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nordea Invest Global 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 Nordea Invest. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nordea Invest Global has no effect on the direction of AP Mller i.e., AP Mller and Nordea Invest go up and down completely randomly.

Pair Corralation between AP Mller and Nordea Invest

Assuming the 90 days trading horizon AP Mller is expected to generate 2.75 times more return on investment than Nordea Invest. However, AP Mller is 2.75 times more volatile than Nordea Invest Global. It trades about 0.08 of its potential returns per unit of risk. Nordea Invest Global is currently generating about -0.09 per unit of risk. If you would invest  1,098,500  in AP Mller on October 11, 2024 and sell it today you would earn a total of  73,000  from holding AP Mller or generate 6.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	87.18%
Values	Daily Returns

AP Mller   vs.  Nordea Invest Global

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

Nordea Invest Global

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Nordea Invest Global are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent fundamental indicators, Nordea Invest is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with AP Mller and Nordea Invest

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

The idea behind AP Mller and Nordea Invest Global 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.