Correlation Between AP Mller and North Media

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

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

Diversification Opportunities for AP Mller and North Media

-0.85

Correlation Coefficient

AP Mller  North Media

Pay attention - limited upside

The 3 months correlation between MAERSK-A and North is -0.85. Overlapping area represents the amount of risk that can be diversified away by holding AP Mller and North Media AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on North Media AS and AP Mller 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 AP Mller are associated (or correlated) with North Media. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of North Media AS has no effect on the direction of AP Mller i.e., AP Mller and North Media go up and down completely randomly.

Pair Corralation between AP Mller and North Media

Assuming the 90 days trading horizon AP Mller is expected to generate 2.08 times more return on investment than North Media. However, AP Mller is 2.08 times more volatile than North Media AS. It trades about 0.09 of its potential returns per unit of risk. North Media AS is currently generating about -0.18 per unit of risk. If you would invest  992,000  in AP Mller on September 13, 2024 and sell it today you would earn a total of  134,000  from holding AP Mller or generate 13.51% return on investment over 90 days.

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

AP Mller   vs.  North Media AS

AP Mller

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in AP Mller are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, AP Mller sustained solid returns over the last few months and may actually be approaching a breakup point.

North Media AS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days North Media AS 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 basic 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 AP Mller and North Media

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

The idea behind AP Mller and North Media 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.