Correlation Between TORM Plc and BankInvest Select

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

By analyzing existing cross correlation between TORM plc and BankInvest Select Small, you can compare the effects of market volatilities on TORM Plc and BankInvest Select 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 TORM Plc with a short position of BankInvest Select. Check out your portfolio center. Please also check ongoing floating volatility patterns of TORM Plc and BankInvest Select.

Diversification Opportunities for TORM Plc and BankInvest Select

-0.53

Correlation Coefficient

TORM Plc  BankInvest Select

Excellent diversification

The 3 months correlation between TORM and BankInvest is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding TORM plc and BankInvest Select Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BankInvest Select Small and TORM Plc 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 TORM plc are associated (or correlated) with BankInvest Select. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BankInvest Select Small has no effect on the direction of TORM Plc i.e., TORM Plc and BankInvest Select go up and down completely randomly.

Pair Corralation between TORM Plc and BankInvest Select

Assuming the 90 days trading horizon TORM plc is expected to under-perform the BankInvest Select. In addition to that, TORM Plc is 1.72 times more volatile than BankInvest Select Small. It trades about -0.28 of its total potential returns per unit of risk. BankInvest Select Small is currently generating about 0.08 per unit of volatility. If you would invest  10,605  in BankInvest Select Small on October 9, 2024 and sell it today you would earn a total of  495.00  from holding BankInvest Select Small or generate 4.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	81.67%
Values	Daily Returns

TORM plc  vs.  BankInvest Select Small

TORM plc

Risk-Adjusted Performance

0 of 100

Very Weak

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

BankInvest Select Small

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in BankInvest Select Small are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady forward-looking signals, BankInvest Select may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with TORM Plc and BankInvest Select

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

The idea behind TORM plc and BankInvest Select Small 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.