Correlation Between AP Mller and Vestas Wind

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Can any of the company-specific risk be diversified away by investing in both AP Mller and Vestas Wind 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 Vestas Wind into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AP Mller and Vestas Wind Systems, you can compare the effects of market volatilities on AP Mller and Vestas Wind 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 Vestas Wind. Check out your portfolio center. Please also check ongoing floating volatility patterns of AP Mller and Vestas Wind.

Diversification Opportunities for AP Mller and Vestas Wind

-0.33
  Correlation Coefficient

Very good diversification

The 3 months correlation between MAERSK-B and Vestas is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding AP Mller and Vestas Wind Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vestas Wind Systems 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 Vestas Wind. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vestas Wind Systems has no effect on the direction of AP Mller i.e., AP Mller and Vestas Wind go up and down completely randomly.

Pair Corralation between AP Mller and Vestas Wind

Assuming the 90 days trading horizon AP Mller is expected to under-perform the Vestas Wind. But the stock apears to be less risky and, when comparing its historical volatility, AP Mller is 1.55 times less risky than Vestas Wind. The stock trades about 0.0 of its potential returns per unit of risk. The Vestas Wind Systems is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  12,440  in Vestas Wind Systems on September 8, 2025 and sell it today you would earn a total of  3,535  from holding Vestas Wind Systems or generate 28.42% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

AP Mller   vs.  Vestas Wind Systems

 Performance 
       Timeline  
AP Mller 

Risk-Adjusted Performance

Weakest

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

Risk-Adjusted Performance

Good

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Vestas Wind Systems are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Vestas Wind displayed solid returns over the last few months and may actually be approaching a breakup point.

AP Mller and Vestas Wind Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with AP Mller and Vestas Wind

The main advantage of trading using opposite AP Mller and Vestas Wind positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AP Mller position performs unexpectedly, Vestas Wind 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 Vestas Wind will offset losses from the drop in Vestas Wind's long position.
The idea behind AP Mller and Vestas Wind Systems 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.

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