Correlation Between First Farms and Lollands Bank
Can any of the company-specific risk be diversified away by investing in both First Farms and Lollands Bank 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 First Farms and Lollands Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Farms AS and Lollands Bank, you can compare the effects of market volatilities on First Farms and Lollands Bank 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 First Farms with a short position of Lollands Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Farms and Lollands Bank.
Diversification Opportunities for First Farms and Lollands Bank
-0.09 | Correlation Coefficient |
Good diversification
The 3 months correlation between First and Lollands is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding First Farms AS and Lollands Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lollands Bank and First Farms 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 First Farms AS are associated (or correlated) with Lollands Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lollands Bank has no effect on the direction of First Farms i.e., First Farms and Lollands Bank go up and down completely randomly.
Pair Corralation between First Farms and Lollands Bank
Assuming the 90 days trading horizon First Farms AS is expected to under-perform the Lollands Bank. In addition to that, First Farms is 1.12 times more volatile than Lollands Bank. It trades about -0.01 of its total potential returns per unit of risk. Lollands Bank is currently generating about 0.01 per unit of volatility. If you would invest 54,526 in Lollands Bank on August 25, 2024 and sell it today you would earn a total of 1,474 from holding Lollands Bank or generate 2.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Farms AS vs. Lollands Bank
Performance |
| Timeline |
| First Farms AS |
| Lollands Bank |
First Farms and Lollands Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Farms and Lollands Bank
The main advantage of trading using opposite First Farms and Lollands Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Farms position performs unexpectedly, Lollands Bank 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 Lollands Bank will offset losses from the drop in Lollands Bank's long position.| First Farms vs. HH International AS | First Farms vs. SKAKO AS | First Farms vs. Spar Nord Bank | First Farms vs. Matas AS |
| Lollands Bank vs. Dataproces Group AS | Lollands Bank vs. cBrain AS | Lollands Bank vs. ALK Abell AS | Lollands Bank vs. ChemoMetec AS |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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