Correlation Between Demant AS and ISS AS
Can any of the company-specific risk be diversified away by investing in both Demant AS and ISS AS 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 Demant AS and ISS AS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Demant AS and ISS AS, you can compare the effects of market volatilities on Demant AS and ISS AS 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 Demant AS with a short position of ISS AS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Demant AS and ISS AS.
Diversification Opportunities for Demant AS and ISS AS
Very good diversification
The 3 months correlation between Demant and ISS is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Demant AS and ISS AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ISS AS and Demant AS 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 Demant AS are associated (or correlated) with ISS AS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ISS AS has no effect on the direction of Demant AS i.e., Demant AS and ISS AS go up and down completely randomly.
Pair Corralation between Demant AS and ISS AS
Assuming the 90 days trading horizon Demant AS is expected to generate 1.26 times more return on investment than ISS AS. However, Demant AS is 1.26 times more volatile than ISS AS. It trades about 0.04 of its potential returns per unit of risk. ISS AS is currently generating about -0.01 per unit of risk. If you would invest 19,725 in Demant AS on September 3, 2024 and sell it today you would earn a total of 7,195 from holding Demant AS or generate 36.48% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Demant AS vs. ISS AS
Performance |
| Timeline |
| Demant AS |
| ISS AS |
Demant AS and ISS AS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Demant AS and ISS AS
The main advantage of trading using opposite Demant AS and ISS AS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Demant AS position performs unexpectedly, ISS AS 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 ISS AS will offset losses from the drop in ISS AS's long position.The idea behind Demant AS and ISS 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.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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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