Correlation Between AP Mller and RIAS AS

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

Diversification Opportunities for AP Mller and RIAS AS

-0.54

Correlation Coefficient

AP Mller  RIAS AS

Excellent diversification

The 3 months correlation between MAERSK-B and RIAS is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding AP Mller and RIAS AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RIAS 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 RIAS AS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RIAS AS has no effect on the direction of AP Mller i.e., AP Mller and RIAS AS go up and down completely randomly.

Pair Corralation between AP Mller and RIAS AS

Assuming the 90 days trading horizon AP Mller is expected to under-perform the RIAS AS. In addition to that, AP Mller is 1.42 times more volatile than RIAS AS. It trades about 0.0 of its total potential returns per unit of risk. RIAS AS is currently generating about 0.01 per unit of volatility. If you would invest  62,000  in RIAS AS on November 20, 2024 and sell it today you would earn a total of  0.00  from holding RIAS AS or generate 0.0% 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.  RIAS AS

AP Mller

Risk-Adjusted Performance

Very Weak

Over the last 90 days AP Mller has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, AP Mller is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

RIAS AS

Risk-Adjusted Performance

Very Weak

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

Pair Trading with AP Mller and RIAS AS

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

The idea behind AP Mller and RIAS 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.