Correlation Between Torm PLC and DHT Holdings
Can any of the company-specific risk be diversified away by investing in both Torm PLC and DHT Holdings 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 Torm PLC and DHT Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Torm PLC Class and DHT Holdings, you can compare the effects of market volatilities on Torm PLC and DHT Holdings 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 Torm PLC with a short position of DHT Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Torm PLC and DHT Holdings.
Diversification Opportunities for Torm PLC and DHT Holdings
0.42 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Torm and DHT is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Torm PLC Class and DHT Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DHT Holdings and Torm PLC 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 Torm PLC Class are associated (or correlated) with DHT Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DHT Holdings has no effect on the direction of Torm PLC i.e., Torm PLC and DHT Holdings go up and down completely randomly.
Pair Corralation between Torm PLC and DHT Holdings
Given the investment horizon of 90 days Torm PLC Class is expected to under-perform the DHT Holdings. In addition to that, Torm PLC is 1.1 times more volatile than DHT Holdings. It trades about -0.07 of its total potential returns per unit of risk. DHT Holdings is currently generating about 0.01 per unit of volatility. If you would invest 1,008 in DHT Holdings on August 27, 2024 and sell it today you would earn a total of 15.00 from holding DHT Holdings or generate 1.49% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Torm PLC Class vs. DHT Holdings
Performance |
| Timeline |
| Torm PLC Class |
| DHT Holdings |
Torm PLC and DHT Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Torm PLC and DHT Holdings
The main advantage of trading using opposite Torm PLC and DHT Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Torm PLC position performs unexpectedly, DHT Holdings 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 DHT Holdings will offset losses from the drop in DHT Holdings' long position.The idea behind Torm PLC Class and DHT Holdings 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.| DHT Holdings vs. Teekay Tankers | DHT Holdings vs. Frontline | DHT Holdings vs. International Seaways | DHT Holdings vs. Scorpio Tankers |
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 CEOs Directory module to screen CEOs from public companies around the world.
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