Correlation Between AP Mller and Skjern Bank

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

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

Diversification Opportunities for AP Mller and Skjern Bank

-0.65

Correlation Coefficient

AP Mller  Skjern Bank

Excellent diversification

The 3 months correlation between MAERSK-B and Skjern is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding AP Mller and Skjern Bank AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Skjern Bank 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 Skjern Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Skjern Bank AS has no effect on the direction of AP Mller i.e., AP Mller and Skjern Bank go up and down completely randomly.

Pair Corralation between AP Mller and Skjern Bank

Assuming the 90 days trading horizon AP Mller is expected to generate 2.07 times more return on investment than Skjern Bank. However, AP Mller is 2.07 times more volatile than Skjern Bank AS. It trades about 0.13 of its potential returns per unit of risk. Skjern Bank AS is currently generating about -0.24 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 Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

AP Mller   vs.  Skjern Bank AS

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.

Skjern Bank AS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Skjern Bank AS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with AP Mller and Skjern Bank

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

The idea behind AP Mller and Skjern Bank 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .