Correlation Between Sparinvest INDEX and LUXOR-B

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

By analyzing existing cross correlation between Sparinvest INDEX Globale and Investeringsselskabet Luxor AS, you can compare the effects of market volatilities on Sparinvest INDEX and LUXOR-B 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 Sparinvest INDEX with a short position of LUXOR-B. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sparinvest INDEX and LUXOR-B.

Diversification Opportunities for Sparinvest INDEX and LUXOR-B

-0.52

Correlation Coefficient

Sparinvest INDEX  LUXOR-B

Excellent diversification

The 3 months correlation between Sparinvest and LUXOR-B is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Sparinvest INDEX Globale and Investeringsselskabet Luxor AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Investeringsselskabet and Sparinvest INDEX 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 Sparinvest INDEX Globale are associated (or correlated) with LUXOR-B. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Investeringsselskabet has no effect on the direction of Sparinvest INDEX i.e., Sparinvest INDEX and LUXOR-B go up and down completely randomly.

Pair Corralation between Sparinvest INDEX and LUXOR-B

Assuming the 90 days trading horizon Sparinvest INDEX Globale is expected to generate 0.24 times more return on investment than LUXOR-B. However, Sparinvest INDEX Globale is 4.21 times less risky than LUXOR-B. It trades about 0.06 of its potential returns per unit of risk. Investeringsselskabet Luxor AS is currently generating about -0.09 per unit of risk. If you would invest  13,319  in Sparinvest INDEX Globale on December 29, 2024 and sell it today you would earn a total of  336.00  from holding Sparinvest INDEX Globale or generate 2.52% return on investment over 90 days.

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

Sparinvest INDEX Globale  vs.  Investeringsselskabet Luxor AS

Sparinvest INDEX Globale

Risk-Adjusted Performance

Insignificant

Over the last 90 days Sparinvest INDEX Globale has generated negative risk-adjusted returns adding no value to fund investors. In spite of very healthy basic indicators, Sparinvest INDEX is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Investeringsselskabet

Risk-Adjusted Performance

Very Weak

Over the last 90 days Investeringsselskabet Luxor AS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Sparinvest INDEX and LUXOR-B

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

The idea behind Sparinvest INDEX Globale and Investeringsselskabet Luxor 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.