Correlation Between ALK Abell and DFDS AS
Can any of the company-specific risk be diversified away by investing in both ALK Abell and DFDS AS 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 ALK Abell and DFDS AS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ALK Abell AS and DFDS AS, you can compare the effects of market volatilities on ALK Abell and DFDS AS 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 ALK Abell with a short position of DFDS AS. Check out your portfolio center. Please also check ongoing floating volatility patterns of ALK Abell and DFDS AS.
Diversification Opportunities for ALK Abell and DFDS AS
Very poor diversification
The 3 months correlation between ALK and DFDS is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding ALK Abell AS and DFDS AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DFDS AS and ALK Abell 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 ALK Abell AS are associated (or correlated) with DFDS AS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DFDS AS has no effect on the direction of ALK Abell i.e., ALK Abell and DFDS AS go up and down completely randomly.
Pair Corralation between ALK Abell and DFDS AS
Assuming the 90 days trading horizon ALK Abell AS is expected to generate 1.14 times more return on investment than DFDS AS. However, ALK Abell is 1.14 times more volatile than DFDS AS. It trades about -0.02 of its potential returns per unit of risk. DFDS AS is currently generating about -0.16 per unit of risk. If you would invest 17,160 in ALK Abell AS on September 6, 2024 and sell it today you would lose (720.00) from holding ALK Abell AS or give up 4.2% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 100.0% |
Values | Daily Returns |
ALK Abell AS vs. DFDS AS
Performance |
Timeline |
ALK Abell AS |
DFDS AS |
ALK Abell and DFDS AS Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with ALK Abell and DFDS AS
The main advantage of trading using opposite ALK Abell and DFDS AS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ALK Abell position performs unexpectedly, DFDS AS 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 DFDS AS will offset losses from the drop in DFDS AS's long position.The idea behind ALK Abell AS and DFDS 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.Check out your portfolio center.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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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