Correlation Between Coloplast and Formuepleje Better
Can any of the company-specific risk be diversified away by investing in both Coloplast and Formuepleje Better 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 Formuepleje Better into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Coloplast AS and Formuepleje Better World, you can compare the effects of market volatilities on Coloplast and Formuepleje Better 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 Formuepleje Better. Check out your portfolio center. Please also check ongoing floating volatility patterns of Coloplast and Formuepleje Better.
Diversification Opportunities for Coloplast and Formuepleje Better
-0.48 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Coloplast and Formuepleje is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Coloplast AS and Formuepleje Better World in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Formuepleje Better World 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 Formuepleje Better. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Formuepleje Better World has no effect on the direction of Coloplast i.e., Coloplast and Formuepleje Better go up and down completely randomly.
Pair Corralation between Coloplast and Formuepleje Better
Assuming the 90 days trading horizon Coloplast AS is expected to generate 2.13 times more return on investment than Formuepleje Better. However, Coloplast is 2.13 times more volatile than Formuepleje Better World. It trades about 0.05 of its potential returns per unit of risk. Formuepleje Better World is currently generating about 0.1 per unit of risk. If you would invest 76,777 in Coloplast AS on August 27, 2024 and sell it today you would earn a total of 12,383 from holding Coloplast AS or generate 16.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Coloplast AS vs. Formuepleje Better World
Performance |
| Timeline |
| Coloplast AS |
| Formuepleje Better World |
Coloplast and Formuepleje Better Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Coloplast and Formuepleje Better
The main advantage of trading using opposite Coloplast and Formuepleje Better positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Coloplast position performs unexpectedly, Formuepleje Better 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 Formuepleje Better will offset losses from the drop in Formuepleje Better's long position.The idea behind Coloplast AS and Formuepleje Better World 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.| Formuepleje Better vs. Jyske Bank AS | Formuepleje Better vs. Carnegie Wealth Management | Formuepleje Better vs. Strategic Investments AS | Formuepleje Better vs. Laan Spar Bank |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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