Correlation Between DHT Holdings and Torm PLC

Can any of the company-specific risk be diversified away by investing in both DHT Holdings and Torm PLC 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 DHT Holdings and Torm PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between DHT Holdings and Torm PLC Class, you can compare the effects of market volatilities on DHT Holdings and Torm PLC 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 DHT Holdings with a short position of Torm PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of DHT Holdings and Torm PLC.

Diversification Opportunities for DHT Holdings and Torm PLC

0.76

Correlation Coefficient

DHT Holdings  Torm PLC

Poor diversification

The 3 months correlation between DHT and Torm is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding DHT Holdings and Torm PLC Class in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Torm PLC Class and DHT Holdings 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 DHT Holdings are associated (or correlated) with Torm PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Torm PLC Class has no effect on the direction of DHT Holdings i.e., DHT Holdings and Torm PLC go up and down completely randomly.

Pair Corralation between DHT Holdings and Torm PLC

Considering the 90-day investment horizon DHT Holdings is expected to under-perform the Torm PLC. In addition to that, DHT Holdings is 1.03 times more volatile than Torm PLC Class. It trades about -0.16 of its total potential returns per unit of risk. Torm PLC Class is currently generating about -0.13 per unit of volatility. If you would invest  2,070  in Torm PLC Class on September 13, 2024 and sell it today you would lose (139.00) from holding Torm PLC Class or give up 6.71% of portfolio value over 90 days.

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

DHT Holdings  vs.  Torm PLC Class

DHT Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DHT Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's technical indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Torm PLC Class

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Torm PLC Class 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 primary indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with DHT Holdings and Torm PLC

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

The idea behind DHT Holdings and Torm PLC Class 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.