Correlation Between Lollands Bank and Carlsberg

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

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

Diversification Opportunities for Lollands Bank and Carlsberg

0.47

Correlation Coefficient

Lollands Bank  Carlsberg

Very weak diversification

The 3 months correlation between Lollands and Carlsberg is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Lollands Bank and Carlsberg AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Carlsberg AS and Lollands Bank 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 Lollands Bank are associated (or correlated) with Carlsberg. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Carlsberg AS has no effect on the direction of Lollands Bank i.e., Lollands Bank and Carlsberg go up and down completely randomly.

Pair Corralation between Lollands Bank and Carlsberg

Assuming the 90 days trading horizon Lollands Bank is expected to generate 0.87 times more return on investment than Carlsberg. However, Lollands Bank is 1.15 times less risky than Carlsberg. It trades about -0.05 of its potential returns per unit of risk. Carlsberg AS is currently generating about -0.07 per unit of risk. If you would invest  57,500  in Lollands Bank on September 2, 2024 and sell it today you would lose (3,000) from holding Lollands Bank or give up 5.22% of portfolio value over 90 days.

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

Lollands Bank  vs.  Carlsberg AS

Lollands Bank

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lollands Bank has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Lollands Bank is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Carlsberg AS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Carlsberg AS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Lollands Bank and Carlsberg

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

The idea behind Lollands Bank and Carlsberg 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.