Correlation Between TORM Plc and Jyske Invest

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

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

Diversification Opportunities for TORM Plc and Jyske Invest

0.2

Correlation Coefficient

TORM Plc  Jyske Invest

Modest diversification

The 3 months correlation between TORM and Jyske is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding TORM plc and Jyske Invest Lange in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jyske Invest Lange 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 Jyske Invest. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jyske Invest Lange has no effect on the direction of TORM Plc i.e., TORM Plc and Jyske Invest go up and down completely randomly.

Pair Corralation between TORM Plc and Jyske Invest

Assuming the 90 days trading horizon TORM plc is expected to generate 8.93 times more return on investment than Jyske Invest. However, TORM Plc is 8.93 times more volatile than Jyske Invest Lange. It trades about 0.01 of its potential returns per unit of risk. Jyske Invest Lange is currently generating about -0.03 per unit of risk. If you would invest  13,000  in TORM plc on December 23, 2024 and sell it today you would lose (250.00) from holding TORM plc or give up 1.92% of portfolio value over 90 days.

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

TORM plc  vs.  Jyske Invest Lange

TORM plc

Risk-Adjusted Performance

Very Weak

Over the last 90 days TORM plc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong primary indicators, TORM Plc is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Jyske Invest Lange

Risk-Adjusted Performance

Very Weak

Over the last 90 days Jyske Invest Lange has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong forward indicators, Jyske Invest is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with TORM Plc and Jyske Invest

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

The idea behind TORM plc and Jyske Invest Lange 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.