Correlation Between Icelandair Group and Marel Hf
Can any of the company-specific risk be diversified away by investing in both Icelandair Group and Marel Hf 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 Icelandair Group and Marel Hf into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Icelandair Group hf and Marel hf, you can compare the effects of market volatilities on Icelandair Group and Marel Hf 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 Icelandair Group with a short position of Marel Hf. Check out your portfolio center. Please also check ongoing floating volatility patterns of Icelandair Group and Marel Hf.
Diversification Opportunities for Icelandair Group and Marel Hf
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Icelandair and Marel is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Icelandair Group hf and Marel hf in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Marel hf and Icelandair Group 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 Icelandair Group hf are associated (or correlated) with Marel Hf. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Marel hf has no effect on the direction of Icelandair Group i.e., Icelandair Group and Marel Hf go up and down completely randomly.
Pair Corralation between Icelandair Group and Marel Hf
Assuming the 90 days trading horizon Icelandair Group hf is expected to generate 2.41 times more return on investment than Marel Hf. However, Icelandair Group is 2.41 times more volatile than Marel hf. It trades about 0.24 of its potential returns per unit of risk. Marel hf is currently generating about 0.25 per unit of risk. If you would invest 107.00 in Icelandair Group hf on August 25, 2024 and sell it today you would earn a total of 14.00 from holding Icelandair Group hf or generate 13.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Icelandair Group hf vs. Marel hf
Performance |
| Timeline |
| Icelandair Group |
| Marel hf |
Icelandair Group and Marel Hf Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Icelandair Group and Marel Hf
The main advantage of trading using opposite Icelandair Group and Marel Hf positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Icelandair Group position performs unexpectedly, Marel Hf 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 Marel Hf will offset losses from the drop in Marel Hf's long position.The idea behind Icelandair Group hf and Marel hf 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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