Correlation Between AP Mller and Carlsberg

Can any of the company-specific risk be diversified away by investing in both AP Mller and Carlsberg 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 AP Mller and Carlsberg into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for AP Mller and Carlsberg

-0.05

Correlation Coefficient

AP Mller  Carlsberg

Good diversification

The 3 months correlation between MAERSK-A and Carlsberg is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding AP Mller and Carlsberg AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Carlsberg AS and AP Mller 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 AP Mller are associated (or correlated) with Carlsberg. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Carlsberg AS has no effect on the direction of AP Mller i.e., AP Mller and Carlsberg go up and down completely randomly.

Pair Corralation between AP Mller and Carlsberg

Assuming the 90 days trading horizon AP Mller is expected to generate 1.45 times more return on investment than Carlsberg. However, AP Mller is 1.45 times more volatile than Carlsberg AS. It trades about 0.05 of its potential returns per unit of risk. Carlsberg AS is currently generating about -0.14 per unit of risk. If you would invest  1,098,000  in AP Mller on March 13, 2024 and sell it today you would earn a total of  19,000  from holding AP Mller or generate 1.73% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

AP Mller   vs.  Carlsberg AS

AP Mller

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in AP Mller are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, AP Mller sustained solid returns over the last few months and may actually be approaching a breakup point.

Carlsberg AS

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Carlsberg AS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Carlsberg is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with AP Mller and Carlsberg

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

The idea behind AP Mller and Carlsberg 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.

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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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.