Correlation Between AP Mller and TCM

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

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

Diversification Opportunities for AP Mller and TCM

0.02

Correlation Coefficient

AP Mller  TCM

Significant diversification

The 3 months correlation between MAERSK-B and TCM is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding AP Mller and TCM Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TCM Group 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 TCM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TCM Group has no effect on the direction of AP Mller i.e., AP Mller and TCM go up and down completely randomly.

Pair Corralation between AP Mller and TCM

Assuming the 90 days trading horizon AP Mller is expected to generate 4.57 times less return on investment than TCM. In addition to that, AP Mller is 1.06 times more volatile than TCM Group. It trades about 0.03 of its total potential returns per unit of risk. TCM Group is currently generating about 0.15 per unit of volatility. If you would invest  6,260  in TCM Group on December 1, 2024 and sell it today you would earn a total of  1,320  from holding TCM Group or generate 21.09% return on investment over 90 days.

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

AP Mller   vs.  TCM Group

AP Mller

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in AP Mller are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. 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.

TCM Group

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in TCM Group are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very weak primary indicators, TCM displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with AP Mller and TCM

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

The idea behind AP Mller and TCM Group 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.