Correlation Between ISS AS and Demant AS
Can any of the company-specific risk be diversified away by investing in both ISS AS and Demant AS 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 ISS AS and Demant AS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ISS AS and Demant AS, you can compare the effects of market volatilities on ISS AS and Demant AS 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 ISS AS with a short position of Demant AS. Check out your portfolio center. Please also check ongoing floating volatility patterns of ISS AS and Demant AS.
Diversification Opportunities for ISS AS and Demant AS
Good diversification
The 3 months correlation between ISS and Demant is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding ISS AS and Demant AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Demant AS and ISS 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 ISS AS are associated (or correlated) with Demant AS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Demant AS has no effect on the direction of ISS AS i.e., ISS AS and Demant AS go up and down completely randomly.
Pair Corralation between ISS AS and Demant AS
Assuming the 90 days trading horizon ISS AS is expected to generate 4.35 times less return on investment than Demant AS. In addition to that, ISS AS is 1.09 times more volatile than Demant AS. It trades about 0.07 of its total potential returns per unit of risk. Demant AS is currently generating about 0.32 per unit of volatility. If you would invest 26,260 in Demant AS on November 4, 2024 and sell it today you would earn a total of 2,740 from holding Demant AS or generate 10.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
ISS AS vs. Demant AS
Performance |
| Timeline |
| ISS AS |
| Demant AS |
ISS AS and Demant AS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ISS AS and Demant AS
The main advantage of trading using opposite ISS AS and Demant AS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ISS AS position performs unexpectedly, Demant AS 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 Demant AS will offset losses from the drop in Demant AS's long position.The idea behind ISS AS and Demant AS 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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