Correlation Between AP Mller and PARKEN Sport

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

By analyzing existing cross correlation between AP Mller and PARKEN Sport Entertainment, you can compare the effects of market volatilities on AP Mller and PARKEN Sport 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 PARKEN Sport. Check out your portfolio center. Please also check ongoing floating volatility patterns of AP Mller and PARKEN Sport.

Diversification Opportunities for AP Mller and PARKEN Sport

-0.25

Correlation Coefficient

AP Mller  PARKEN Sport

Very good diversification

The 3 months correlation between MAERSK-A and PARKEN is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding AP Mller and PARKEN Sport Entertainment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PARKEN Sport Enterta 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 PARKEN Sport. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PARKEN Sport Enterta has no effect on the direction of AP Mller i.e., AP Mller and PARKEN Sport go up and down completely randomly.

Pair Corralation between AP Mller and PARKEN Sport

Assuming the 90 days trading horizon AP Mller is expected to generate 1.87 times more return on investment than PARKEN Sport. However, AP Mller is 1.87 times more volatile than PARKEN Sport Entertainment. It trades about 0.27 of its potential returns per unit of risk. PARKEN Sport Entertainment is currently generating about 0.12 per unit of risk. If you would invest  947,000  in AP Mller on February 22, 2024 and sell it today you would earn a total of  157,000  from holding AP Mller or generate 16.58% 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.  PARKEN Sport Entertainment

AP Mller

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in AP Mller are ranked lower than 8 (%) 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.

PARKEN Sport Enterta

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PARKEN Sport Entertainment has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong technical and fundamental indicators, PARKEN Sport is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with AP Mller and PARKEN Sport

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

The idea behind AP Mller and PARKEN Sport Entertainment 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..