Correlation Between TORM Plc and H Lundbeck

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

By analyzing existing cross correlation between TORM plc and H Lundbeck AS, you can compare the effects of market volatilities on TORM Plc and H Lundbeck 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 H Lundbeck. Check out your portfolio center. Please also check ongoing floating volatility patterns of TORM Plc and H Lundbeck.

Diversification Opportunities for TORM Plc and H Lundbeck

0.41

Correlation Coefficient

TORM Plc  H Lundbeck

Very weak diversification

The 3 months correlation between TORM and HLUN-B is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding TORM plc and H Lundbeck AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on H Lundbeck AS 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 H Lundbeck. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of H Lundbeck AS has no effect on the direction of TORM Plc i.e., TORM Plc and H Lundbeck go up and down completely randomly.

Pair Corralation between TORM Plc and H Lundbeck

Assuming the 90 days trading horizon TORM plc is expected to under-perform the H Lundbeck. In addition to that, TORM Plc is 1.12 times more volatile than H Lundbeck AS. It trades about -0.35 of its total potential returns per unit of risk. H Lundbeck AS is currently generating about -0.07 per unit of volatility. If you would invest  4,800  in H Lundbeck AS on September 3, 2024 and sell it today you would lose (400.00) from holding H Lundbeck AS or give up 8.33% of portfolio value over 90 days.

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

TORM plc  vs.  H Lundbeck AS

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 January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

H Lundbeck AS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days H Lundbeck AS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with TORM Plc and H Lundbeck

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

The idea behind TORM plc and H Lundbeck 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 Stocks Directory module to find actively traded stocks across global markets.