Correlation Between Pandora A/S and Target

Can any of the company-specific risk be diversified away by investing in both Pandora A/S and Target 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 Pandora A/S and Target into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Pandora AS and Target, you can compare the effects of market volatilities on Pandora A/S and Target 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 Pandora A/S with a short position of Target. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pandora A/S and Target.

Diversification Opportunities for Pandora A/S and Target

0.85

Correlation Coefficient

Pandora A/S  Target

Very poor diversification

The 3 months correlation between Pandora and Target is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Pandora AS and Target in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Target and Pandora A/S 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 Pandora AS are associated (or correlated) with Target. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Target has no effect on the direction of Pandora A/S i.e., Pandora A/S and Target go up and down completely randomly.

Pair Corralation between Pandora A/S and Target

Assuming the 90 days horizon Pandora AS is expected to generate 1.23 times more return on investment than Target. However, Pandora A/S is 1.23 times more volatile than Target. It trades about -0.05 of its potential returns per unit of risk. Target is currently generating about -0.44 per unit of risk. If you would invest  14,700  in Pandora AS on February 1, 2024 and sell it today you would lose (215.00) from holding Pandora AS or give up 1.46% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.45%
Values	Daily Returns

Pandora AS  vs.  Target

Pandora A/S

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Pandora AS are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Pandora A/S reported solid returns over the last few months and may actually be approaching a breakup point.

Target

Risk-Adjusted Performance

8 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Target are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical and fundamental indicators, Target unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Pandora A/S and Target

The main advantage of trading using opposite Pandora A/S and Target positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pandora A/S position performs unexpectedly, Target 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 Target will offset losses from the drop in Target's long position.

The idea behind Pandora AS and Target 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.

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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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.