Correlation Between Vestas Wind and DSV Panalpina

Can any of the company-specific risk be diversified away by investing in both Vestas Wind and DSV Panalpina 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 Vestas Wind and DSV Panalpina into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Vestas Wind and DSV Panalpina

-0.62

Correlation Coefficient

Vestas Wind  DSV Panalpina

Excellent diversification

The 3 months correlation between Vestas and DSV is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Vestas Wind Systems and DSV Panalpina AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DSV Panalpina AS and Vestas Wind 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 Vestas Wind Systems are associated (or correlated) with DSV Panalpina. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DSV Panalpina AS has no effect on the direction of Vestas Wind i.e., Vestas Wind and DSV Panalpina go up and down completely randomly.

Pair Corralation between Vestas Wind and DSV Panalpina

Assuming the 90 days trading horizon Vestas Wind Systems is expected to under-perform the DSV Panalpina. In addition to that, Vestas Wind is 1.73 times more volatile than DSV Panalpina AS. It trades about -0.14 of its total potential returns per unit of risk. DSV Panalpina AS is currently generating about 0.18 per unit of volatility. If you would invest  123,350  in DSV Panalpina AS on September 3, 2024 and sell it today you would earn a total of  27,350  from holding DSV Panalpina AS or generate 22.17% return on investment over 90 days.

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

Vestas Wind Systems  vs.  DSV Panalpina AS

Vestas Wind Systems

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vestas Wind Systems has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

DSV Panalpina AS

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in DSV Panalpina AS are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, DSV Panalpina displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Vestas Wind and DSV Panalpina

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

The idea behind Vestas Wind Systems and DSV Panalpina 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.