Correlation Between FLSmidth and Lollands Bank
Can any of the company-specific risk be diversified away by investing in both FLSmidth 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 FLSmidth and Lollands Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between FLSmidth Co and Lollands Bank, you can compare the effects of market volatilities on FLSmidth 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 FLSmidth with a short position of Lollands Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of FLSmidth and Lollands Bank.
Diversification Opportunities for FLSmidth and Lollands Bank
-0.15 | Correlation Coefficient |
Good diversification
The 3 months correlation between FLSmidth and Lollands is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding FLSmidth Co and Lollands Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lollands Bank and FLSmidth 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 FLSmidth Co 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 FLSmidth i.e., FLSmidth and Lollands Bank go up and down completely randomly.
Pair Corralation between FLSmidth and Lollands Bank
Assuming the 90 days trading horizon FLSmidth Co is expected to under-perform the Lollands Bank. But the stock apears to be less risky and, when comparing its historical volatility, FLSmidth Co is 1.46 times less risky than Lollands Bank. The stock trades about -0.07 of its potential returns per unit of risk. The Lollands Bank is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 55,000 in Lollands Bank on September 18, 2024 and sell it today you would earn a total of 3,000 from holding Lollands Bank or generate 5.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
FLSmidth Co vs. Lollands Bank
Performance |
| Timeline |
| FLSmidth |
| Lollands Bank |
FLSmidth and Lollands Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with FLSmidth and Lollands Bank
The main advantage of trading using opposite FLSmidth and Lollands Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FLSmidth 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.The idea behind FLSmidth Co and Lollands Bank 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.| Lollands Bank vs. FLSmidth Co | Lollands Bank vs. Danske Bank AS | Lollands Bank vs. ISS AS | Lollands Bank vs. DSV Panalpina 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 Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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