Correlation Between Copenhagen Airports and TORM Plc

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

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

Diversification Opportunities for Copenhagen Airports and TORM Plc

-0.4

Correlation Coefficient

Copenhagen Airports  TORM Plc

Very good diversification

The 3 months correlation between Copenhagen and TORM is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Copenhagen Airports AS and TORM plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TORM plc and Copenhagen Airports 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 Copenhagen Airports AS 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 has no effect on the direction of Copenhagen Airports i.e., Copenhagen Airports and TORM Plc go up and down completely randomly.

Pair Corralation between Copenhagen Airports and TORM Plc

Assuming the 90 days trading horizon Copenhagen Airports AS is expected to generate 4.15 times more return on investment than TORM Plc. However, Copenhagen Airports is 4.15 times more volatile than TORM plc. It trades about 0.11 of its potential returns per unit of risk. TORM plc is currently generating about -0.42 per unit of risk. If you would invest  408,000  in Copenhagen Airports AS on September 13, 2024 and sell it today you would earn a total of  204,000  from holding Copenhagen Airports AS or generate 50.0% return on investment over 90 days.

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

Copenhagen Airports AS  vs.  TORM plc

Copenhagen Airports

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Copenhagen Airports AS are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Copenhagen Airports displayed solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with Copenhagen Airports and TORM Plc

The main advantage of trading using opposite Copenhagen Airports and TORM Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Copenhagen Airports 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 Copenhagen Airports AS and TORM plc 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.