Correlation Between Dampskibsselskabet and Erria AS

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

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

Diversification Opportunities for Dampskibsselskabet and Erria AS

0.11

Correlation Coefficient

Dampskibsselskabet  Erria AS

Average diversification

The 3 months correlation between Dampskibsselskabet and Erria is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Dampskibsselskabet Norden AS and Erria AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Erria AS and Dampskibsselskabet 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 Dampskibsselskabet Norden AS are associated (or correlated) with Erria AS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Erria AS has no effect on the direction of Dampskibsselskabet i.e., Dampskibsselskabet and Erria AS go up and down completely randomly.

Pair Corralation between Dampskibsselskabet and Erria AS

Assuming the 90 days trading horizon Dampskibsselskabet is expected to generate 3.34 times less return on investment than Erria AS. In addition to that, Dampskibsselskabet is 1.04 times more volatile than Erria AS. It trades about 0.07 of its total potential returns per unit of risk. Erria AS is currently generating about 0.25 per unit of volatility. If you would invest  345.00  in Erria AS on January 26, 2024 and sell it today you would earn a total of  25.00  from holding Erria AS or generate 7.25% return on investment over 90 days.

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

Dampskibsselskabet Norden AS  vs.  Erria AS

Dampskibsselskabet

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dampskibsselskabet Norden AS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's fundamental indicators remain rather sound which may send shares a bit higher in May 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Erria AS

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Erria AS are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Erria AS is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Dampskibsselskabet and Erria AS

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

The idea behind Dampskibsselskabet Norden AS and Erria 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.