Correlation Between Derwent London and ELECTROLUX
Can any of the company-specific risk be diversified away by investing in both Derwent London and ELECTROLUX 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 Derwent London and ELECTROLUX into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Derwent London PLC and ELECTROLUX B ADR2, you can compare the effects of market volatilities on Derwent London and ELECTROLUX 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 Derwent London with a short position of ELECTROLUX. Check out your portfolio center. Please also check ongoing floating volatility patterns of Derwent London and ELECTROLUX.
Diversification Opportunities for Derwent London and ELECTROLUX
-0.52 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Derwent and ELECTROLUX is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Derwent London PLC and ELECTROLUX B ADR2 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ELECTROLUX B ADR2 and Derwent London 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 Derwent London PLC are associated (or correlated) with ELECTROLUX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ELECTROLUX B ADR2 has no effect on the direction of Derwent London i.e., Derwent London and ELECTROLUX go up and down completely randomly.
Pair Corralation between Derwent London and ELECTROLUX
Assuming the 90 days horizon Derwent London PLC is expected to generate 0.73 times more return on investment than ELECTROLUX. However, Derwent London PLC is 1.37 times less risky than ELECTROLUX. It trades about 0.06 of its potential returns per unit of risk. ELECTROLUX B ADR2 is currently generating about -0.03 per unit of risk. If you would invest 2,015 in Derwent London PLC on September 12, 2024 and sell it today you would earn a total of 967.00 from holding Derwent London PLC or generate 47.99% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Derwent London PLC vs. ELECTROLUX B ADR2
Performance |
| Timeline |
| Derwent London PLC |
| ELECTROLUX B ADR2 |
Derwent London and ELECTROLUX Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Derwent London and ELECTROLUX
The main advantage of trading using opposite Derwent London and ELECTROLUX positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Derwent London position performs unexpectedly, ELECTROLUX 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 ELECTROLUX will offset losses from the drop in ELECTROLUX's long position.| Derwent London vs. EEDUCATION ALBERT AB | Derwent London vs. Iridium Communications | Derwent London vs. CHINA TELECOM H | Derwent London vs. ScanSource |
| ELECTROLUX vs. Qingdao Haier Co | ELECTROLUX vs. Qingdao Haier Co | ELECTROLUX vs. Mohawk Industries | ELECTROLUX vs. SEB SA |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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