Correlation Between Lgerin Egill and Icelandair Group

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

By analyzing existing cross correlation between lgerin Egill Skallagrmsson and Icelandair Group hf, you can compare the effects of market volatilities on Lgerin Egill and Icelandair Group 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 Lgerin Egill with a short position of Icelandair Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lgerin Egill and Icelandair Group.

Diversification Opportunities for Lgerin Egill and Icelandair Group

0.36

Correlation Coefficient

Lgerin Egill  Icelandair Group

Weak diversification

The 3 months correlation between Lgerin and Icelandair is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding lgerin Egill Skallagrmsson and Icelandair Group hf in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Icelandair Group and Lgerin Egill 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 lgerin Egill Skallagrmsson are associated (or correlated) with Icelandair Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Icelandair Group has no effect on the direction of Lgerin Egill i.e., Lgerin Egill and Icelandair Group go up and down completely randomly.

Pair Corralation between Lgerin Egill and Icelandair Group

Assuming the 90 days trading horizon Lgerin Egill is expected to generate 4.76 times less return on investment than Icelandair Group. But when comparing it to its historical volatility, lgerin Egill Skallagrmsson is 1.77 times less risky than Icelandair Group. It trades about 0.08 of its potential returns per unit of risk. Icelandair Group hf is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  91.00  in Icelandair Group hf on September 13, 2024 and sell it today you would earn a total of  39.00  from holding Icelandair Group hf or generate 42.86% return on investment over 90 days.

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

lgerin Egill Skallagrmsson  vs.  Icelandair Group hf

lgerin Egill Skallag

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in lgerin Egill Skallagrmsson are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady technical and fundamental indicators, Lgerin Egill may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Icelandair Group

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Icelandair Group hf are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat inconsistent technical and fundamental indicators, Icelandair Group sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lgerin Egill and Icelandair Group

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

The idea behind lgerin Egill Skallagrmsson and Icelandair Group hf 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.