Correlation Between Ansell and Coloplast
Can any of the company-specific risk be diversified away by investing in both Ansell and Coloplast 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 Ansell and Coloplast into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ansell Ltd ADR and Coloplast A, you can compare the effects of market volatilities on Ansell and Coloplast 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 Ansell with a short position of Coloplast. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ansell and Coloplast.
Diversification Opportunities for Ansell and Coloplast
Very good diversification
The 3 months correlation between Ansell and Coloplast is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Ansell Ltd ADR and Coloplast A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coloplast A and Ansell 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 Ansell Ltd ADR are associated (or correlated) with Coloplast. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Coloplast A has no effect on the direction of Ansell i.e., Ansell and Coloplast go up and down completely randomly.
Pair Corralation between Ansell and Coloplast
Assuming the 90 days horizon Ansell is expected to generate 2.48 times less return on investment than Coloplast. But when comparing it to its historical volatility, Ansell Ltd ADR is 1.48 times less risky than Coloplast. It trades about 0.01 of its potential returns per unit of risk. Coloplast A is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 1,171 in Coloplast A on August 28, 2024 and sell it today you would earn a total of 87.00 from holding Coloplast A or generate 7.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 5.25% |
| Values | Daily Returns |
Ansell Ltd ADR vs. Coloplast A
Performance |
| Timeline |
| Ansell Ltd ADR |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Coloplast A |
Ansell and Coloplast Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ansell and Coloplast
The main advantage of trading using opposite Ansell and Coloplast positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ansell position performs unexpectedly, Coloplast 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 Coloplast will offset losses from the drop in Coloplast's long position.The idea behind Ansell Ltd ADR and Coloplast A 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.| Coloplast vs. Straumann Holding AG | Coloplast vs. Hoya Corp | Coloplast vs. EssilorLuxottica Socit anonyme | Coloplast vs. Essilor International SA |
Check out your portfolio center.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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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