Correlation Between Vestas Wind and TORM Plc
Can any of the company-specific risk be diversified away by investing in both Vestas Wind and TORM Plc 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 Vestas Wind and TORM Plc into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vestas Wind Systems and TORM plc, you can compare the effects of market volatilities on Vestas Wind and TORM Plc 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 Vestas Wind with a short position of TORM Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vestas Wind and TORM Plc.
Diversification Opportunities for Vestas Wind and TORM Plc
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Vestas and TORM is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Vestas Wind Systems and TORM plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TORM plc and Vestas Wind 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 Vestas Wind Systems are associated (or correlated) with TORM Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TORM plc has no effect on the direction of Vestas Wind i.e., Vestas Wind and TORM Plc go up and down completely randomly.
Pair Corralation between Vestas Wind and TORM Plc
Assuming the 90 days trading horizon Vestas Wind Systems is expected to under-perform the TORM Plc. In addition to that, Vestas Wind is 2.32 times more volatile than TORM plc. It trades about -0.26 of its total potential returns per unit of risk. TORM plc is currently generating about -0.45 per unit of volatility. If you would invest 18,380 in TORM plc on August 29, 2024 and sell it today you would lose (3,250) from holding TORM plc or give up 17.68% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vestas Wind Systems vs. TORM plc
Performance |
| Timeline |
| Vestas Wind Systems |
| TORM plc |
Vestas Wind and TORM Plc Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vestas Wind and TORM Plc
The main advantage of trading using opposite Vestas Wind and TORM Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vestas Wind position performs unexpectedly, TORM Plc 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 TORM Plc will offset losses from the drop in TORM Plc's long position.| Vestas Wind vs. Orsted AS | Vestas Wind vs. Danske Bank AS | Vestas Wind vs. Bavarian Nordic | Vestas Wind vs. DSV Panalpina AS |
| TORM Plc vs. Danske Bank AS | TORM Plc vs. DSV Panalpina AS | TORM Plc vs. AP Mller | TORM Plc vs. Vestas Wind Systems |
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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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