Correlation Between TORM Plc and Dampskibsselskabet

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

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

Diversification Opportunities for TORM Plc and Dampskibsselskabet

0.34

Correlation Coefficient

TORM Plc  Dampskibsselskabet

Weak diversification

The 3 months correlation between TORM and Dampskibsselskabet is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding TORM plc and Dampskibsselskabet Norden AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dampskibsselskabet and TORM Plc 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 TORM plc are associated (or correlated) with Dampskibsselskabet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dampskibsselskabet has no effect on the direction of TORM Plc i.e., TORM Plc and Dampskibsselskabet go up and down completely randomly.

Pair Corralation between TORM Plc and Dampskibsselskabet

Assuming the 90 days trading horizon TORM plc is expected to generate 1.06 times more return on investment than Dampskibsselskabet. However, TORM Plc is 1.06 times more volatile than Dampskibsselskabet Norden AS. It trades about 0.11 of its potential returns per unit of risk. Dampskibsselskabet Norden AS is currently generating about 0.04 per unit of risk. If you would invest  5,158  in TORM plc on January 25, 2024 and sell it today you would earn a total of  18,122  from holding TORM plc or generate 351.34% return on investment over 90 days.

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

TORM plc  vs.  Dampskibsselskabet Norden AS

TORM plc

Risk-Adjusted Performance

0 of 100

Very Weak

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

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 unfluctuating 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.

Pair Trading with TORM Plc and Dampskibsselskabet

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

The idea behind TORM plc and Dampskibsselskabet Norden 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.