Correlation Between Coloplast and Demant AS
Can any of the company-specific risk be diversified away by investing in both Coloplast and Demant 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 Coloplast and Demant AS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Coloplast AS and Demant AS, you can compare the effects of market volatilities on Coloplast and Demant 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 Coloplast with a short position of Demant AS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Coloplast and Demant AS.
Diversification Opportunities for Coloplast and Demant AS
Poor diversification
The 3 months correlation between Coloplast and Demant is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Coloplast AS and Demant AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Demant AS and Coloplast 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 Coloplast AS are associated (or correlated) with Demant AS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Demant AS has no effect on the direction of Coloplast i.e., Coloplast and Demant AS go up and down completely randomly.
Pair Corralation between Coloplast and Demant AS
Assuming the 90 days trading horizon Coloplast AS is expected to under-perform the Demant AS. But the stock apears to be less risky and, when comparing its historical volatility, Coloplast AS is 1.21 times less risky than Demant AS. The stock trades about 0.0 of its potential returns per unit of risk. The Demant AS is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest 29,200 in Demant AS on August 29, 2024 and sell it today you would lose (2,220) from holding Demant AS or give up 7.6% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Coloplast AS vs. Demant AS
Performance |
| Timeline |
| Coloplast AS |
| Demant AS |
Coloplast and Demant AS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Coloplast and Demant AS
The main advantage of trading using opposite Coloplast and Demant AS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Coloplast position performs unexpectedly, Demant 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 Demant AS will offset losses from the drop in Demant AS's long position.The idea behind Coloplast AS and Demant 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.| Demant AS vs. GN Store Nord | Demant AS vs. Ambu AS | Demant AS vs. ISS AS | Demant AS vs. ROCKWOOL International AS |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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