Correlation Between RIAS AS and Lollands Bank

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

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

Diversification Opportunities for RIAS AS and Lollands Bank

0.12

Correlation Coefficient

RIAS AS  Lollands Bank

Average diversification

The 3 months correlation between RIAS and Lollands is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding RIAS AS and Lollands Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lollands Bank and RIAS AS 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 RIAS AS are associated (or correlated) with Lollands Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lollands Bank has no effect on the direction of RIAS AS i.e., RIAS AS and Lollands Bank go up and down completely randomly.

Pair Corralation between RIAS AS and Lollands Bank

Assuming the 90 days trading horizon RIAS AS is expected to generate 1.63 times more return on investment than Lollands Bank. However, RIAS AS is 1.63 times more volatile than Lollands Bank. It trades about 0.0 of its potential returns per unit of risk. Lollands Bank is currently generating about -0.04 per unit of risk. If you would invest  64,000  in RIAS AS on September 3, 2024 and sell it today you would lose (1,500) from holding RIAS AS or give up 2.34% of portfolio value over 90 days.

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

RIAS AS  vs.  Lollands Bank

RIAS AS

Risk-Adjusted Performance

0 of 100

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.

Lollands Bank

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lollands Bank has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Lollands Bank is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with RIAS AS and Lollands Bank

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

The idea behind RIAS AS and Lollands Bank 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.