Correlation Between FLSmidth and H Lundbeck
Can any of the company-specific risk be diversified away by investing in both FLSmidth and H Lundbeck 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 FLSmidth and H Lundbeck into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between FLSmidth Co and H Lundbeck AS, you can compare the effects of market volatilities on FLSmidth and H Lundbeck 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 FLSmidth with a short position of H Lundbeck. Check out your portfolio center. Please also check ongoing floating volatility patterns of FLSmidth and H Lundbeck.
Diversification Opportunities for FLSmidth and H Lundbeck
-0.71 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between FLSmidth and HLUN-A is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding FLSmidth Co and H Lundbeck AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on H Lundbeck AS and FLSmidth 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 FLSmidth Co are associated (or correlated) with H Lundbeck. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of H Lundbeck AS has no effect on the direction of FLSmidth i.e., FLSmidth and H Lundbeck go up and down completely randomly.
Pair Corralation between FLSmidth and H Lundbeck
Assuming the 90 days trading horizon FLSmidth Co is expected to generate 0.71 times more return on investment than H Lundbeck. However, FLSmidth Co is 1.41 times less risky than H Lundbeck. It trades about 0.04 of its potential returns per unit of risk. H Lundbeck AS is currently generating about -0.05 per unit of risk. If you would invest 36,920 in FLSmidth Co on August 29, 2024 and sell it today you would earn a total of 360.00 from holding FLSmidth Co or generate 0.98% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
FLSmidth Co vs. H Lundbeck AS
Performance |
| Timeline |
| FLSmidth |
| H Lundbeck AS |
FLSmidth and H Lundbeck Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with FLSmidth and H Lundbeck
The main advantage of trading using opposite FLSmidth and H Lundbeck positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FLSmidth position performs unexpectedly, H Lundbeck 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 H Lundbeck will offset losses from the drop in H Lundbeck's long position.The idea behind FLSmidth Co and H Lundbeck 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.| H Lundbeck vs. H Lundbeck AS | H Lundbeck vs. GN Store Nord | H Lundbeck vs. Nordea Bank Abp | H Lundbeck vs. FLSmidth Co |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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