Correlation Between Moens Bank and FLSmidth

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

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

Diversification Opportunities for Moens Bank and FLSmidth

-0.68

Correlation Coefficient

Moens Bank  FLSmidth

Excellent diversification

The 3 months correlation between Moens and FLSmidth is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Moens Bank AS and FLSmidth Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FLSmidth and Moens 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 Moens Bank AS are associated (or correlated) with FLSmidth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FLSmidth has no effect on the direction of Moens Bank i.e., Moens Bank and FLSmidth go up and down completely randomly.

Pair Corralation between Moens Bank and FLSmidth

Assuming the 90 days trading horizon Moens Bank AS is expected to under-perform the FLSmidth. But the stock apears to be less risky and, when comparing its historical volatility, Moens Bank AS is 1.42 times less risky than FLSmidth. The stock trades about -0.08 of its potential returns per unit of risk. The FLSmidth Co is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  33,120  in FLSmidth Co on September 3, 2024 and sell it today you would earn a total of  5,400  from holding FLSmidth Co or generate 16.3% return on investment over 90 days.

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

Moens Bank AS  vs.  FLSmidth Co

Moens Bank AS

Risk-Adjusted Performance

0 of 100

Very Weak

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

FLSmidth

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in FLSmidth Co are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, FLSmidth displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Moens Bank and FLSmidth

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

The idea behind Moens Bank AS and FLSmidth Co 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.