Correlation Between DFDS AS and Vestas Wind
Can any of the company-specific risk be diversified away by investing in both DFDS AS and Vestas Wind 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 DFDS AS and Vestas Wind into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between DFDS AS and Vestas Wind Systems, you can compare the effects of market volatilities on DFDS AS and Vestas Wind 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 DFDS AS with a short position of Vestas Wind. Check out your portfolio center. Please also check ongoing floating volatility patterns of DFDS AS and Vestas Wind.
Diversification Opportunities for DFDS AS and Vestas Wind
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between DFDS and Vestas is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding DFDS AS and Vestas Wind Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vestas Wind Systems and DFDS 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 DFDS AS are associated (or correlated) with Vestas Wind. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vestas Wind Systems has no effect on the direction of DFDS AS i.e., DFDS AS and Vestas Wind go up and down completely randomly.
Pair Corralation between DFDS AS and Vestas Wind
Assuming the 90 days trading horizon DFDS AS is expected to under-perform the Vestas Wind. But the stock apears to be less risky and, when comparing its historical volatility, DFDS AS is 1.5 times less risky than Vestas Wind. The stock trades about -0.09 of its potential returns per unit of risk. The Vestas Wind Systems is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest 20,205 in Vestas Wind Systems on August 31, 2024 and sell it today you would lose (9,415) from holding Vestas Wind Systems or give up 46.6% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
DFDS AS vs. Vestas Wind Systems
Performance |
| Timeline |
| DFDS AS |
| Vestas Wind Systems |
DFDS AS and Vestas Wind Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with DFDS AS and Vestas Wind
The main advantage of trading using opposite DFDS AS and Vestas Wind positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DFDS AS position performs unexpectedly, Vestas Wind 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 Vestas Wind will offset losses from the drop in Vestas Wind's long position.The idea behind DFDS AS and Vestas Wind Systems 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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