Correlation Between North Media and Dampskibsselskabet

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

By analyzing existing cross correlation between North Media AS and Dampskibsselskabet Norden AS, you can compare the effects of market volatilities on North Media and Dampskibsselskabet 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 North Media with a short position of Dampskibsselskabet. Check out your portfolio center. Please also check ongoing floating volatility patterns of North Media and Dampskibsselskabet.

Diversification Opportunities for North Media and Dampskibsselskabet

0.87

Correlation Coefficient

North Media  Dampskibsselskabet

Very poor diversification

The 3 months correlation between North and Dampskibsselskabet is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding North Media AS and Dampskibsselskabet Norden AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dampskibsselskabet and North Media 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 North Media AS are associated (or correlated) with Dampskibsselskabet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dampskibsselskabet has no effect on the direction of North Media i.e., North Media and Dampskibsselskabet go up and down completely randomly.

Pair Corralation between North Media and Dampskibsselskabet

Assuming the 90 days trading horizon North Media AS is expected to generate 0.79 times more return on investment than Dampskibsselskabet. However, North Media AS is 1.27 times less risky than Dampskibsselskabet. It trades about -0.03 of its potential returns per unit of risk. Dampskibsselskabet Norden AS is currently generating about -0.13 per unit of risk. If you would invest  5,440  in North Media AS on October 9, 2024 and sell it today you would lose (240.00) from holding North Media AS or give up 4.41% of portfolio value over 90 days.

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

North Media AS  vs.  Dampskibsselskabet Norden AS

North Media AS

Risk-Adjusted Performance

0 of 100

Very Weak

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

Dampskibsselskabet

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dampskibsselskabet Norden AS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's fundamental indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with North Media and Dampskibsselskabet

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

The idea behind North Media AS and Dampskibsselskabet Norden 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.