Correlation Between FLSmidth and Nilfisk Holding
Can any of the company-specific risk be diversified away by investing in both FLSmidth and Nilfisk Holding 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 Nilfisk Holding into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between FLSmidth Co and Nilfisk Holding AS, you can compare the effects of market volatilities on FLSmidth and Nilfisk Holding 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 Nilfisk Holding. Check out your portfolio center. Please also check ongoing floating volatility patterns of FLSmidth and Nilfisk Holding.
Diversification Opportunities for FLSmidth and Nilfisk Holding
-0.47 | Correlation Coefficient |
Very good diversification
The 3 months correlation between FLSmidth and Nilfisk is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding FLSmidth Co and Nilfisk Holding AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nilfisk Holding 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 Nilfisk Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nilfisk Holding AS has no effect on the direction of FLSmidth i.e., FLSmidth and Nilfisk Holding go up and down completely randomly.
Pair Corralation between FLSmidth and Nilfisk Holding
Assuming the 90 days trading horizon FLSmidth Co is expected to generate 0.75 times more return on investment than Nilfisk Holding. However, FLSmidth Co is 1.33 times less risky than Nilfisk Holding. It trades about 0.16 of its potential returns per unit of risk. Nilfisk Holding AS is currently generating about -0.14 per unit of risk. If you would invest 32,520 in FLSmidth Co on September 12, 2024 and sell it today you would earn a total of 5,460 from holding FLSmidth Co or generate 16.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 98.46% |
| Values | Daily Returns |
FLSmidth Co vs. Nilfisk Holding AS
Performance |
| Timeline |
| FLSmidth |
| Nilfisk Holding AS |
FLSmidth and Nilfisk Holding Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with FLSmidth and Nilfisk Holding
The main advantage of trading using opposite FLSmidth and Nilfisk Holding positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FLSmidth position performs unexpectedly, Nilfisk Holding 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 Nilfisk Holding will offset losses from the drop in Nilfisk Holding's long position.The idea behind FLSmidth Co and Nilfisk Holding 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.| Nilfisk Holding vs. NKT AS | Nilfisk Holding vs. ISS AS | Nilfisk Holding vs. Demant AS | Nilfisk Holding vs. Matas 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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