Correlation Between Alm Brand and Danish Aerospace
Can any of the company-specific risk be diversified away by investing in both Alm Brand and Danish Aerospace 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 Alm Brand and Danish Aerospace into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Alm Brand and Danish Aerospace, you can compare the effects of market volatilities on Alm Brand and Danish Aerospace 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 Alm Brand with a short position of Danish Aerospace. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alm Brand and Danish Aerospace.
Diversification Opportunities for Alm Brand and Danish Aerospace
-0.61 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Alm and Danish is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Alm Brand and Danish Aerospace in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Danish Aerospace and Alm Brand 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 Alm Brand are associated (or correlated) with Danish Aerospace. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Danish Aerospace has no effect on the direction of Alm Brand i.e., Alm Brand and Danish Aerospace go up and down completely randomly.
Pair Corralation between Alm Brand and Danish Aerospace
Assuming the 90 days trading horizon Alm Brand is expected to generate 1.09 times less return on investment than Danish Aerospace. But when comparing it to its historical volatility, Alm Brand is 3.31 times less risky than Danish Aerospace. It trades about 0.03 of its potential returns per unit of risk. Danish Aerospace is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 397.00 in Danish Aerospace on October 20, 2024 and sell it today you would lose (125.00) from holding Danish Aerospace or give up 31.49% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Alm Brand vs. Danish Aerospace
Performance |
| Timeline |
| Alm Brand |
| Danish Aerospace |
Alm Brand and Danish Aerospace Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Alm Brand and Danish Aerospace
The main advantage of trading using opposite Alm Brand and Danish Aerospace positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alm Brand position performs unexpectedly, Danish Aerospace 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 Danish Aerospace will offset losses from the drop in Danish Aerospace's long position.The idea behind Alm Brand and Danish Aerospace 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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