Correlation Between GN Store and Schouw
Can any of the company-specific risk be diversified away by investing in both GN Store and Schouw 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 GN Store and Schouw into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between GN Store Nord and Schouw Co, you can compare the effects of market volatilities on GN Store and Schouw 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 GN Store with a short position of Schouw. Check out your portfolio center. Please also check ongoing floating volatility patterns of GN Store and Schouw.
Diversification Opportunities for GN Store and Schouw
Modest diversification
The 3 months correlation between GN Store and Schouw is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding GN Store Nord and Schouw Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Schouw and GN Store 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 GN Store Nord are associated (or correlated) with Schouw. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Schouw has no effect on the direction of GN Store i.e., GN Store and Schouw go up and down completely randomly.
Pair Corralation between GN Store and Schouw
Assuming the 90 days horizon GN Store Nord is expected to under-perform the Schouw. In addition to that, GN Store is 3.35 times more volatile than Schouw Co. It trades about -0.02 of its total potential returns per unit of risk. Schouw Co is currently generating about 0.21 per unit of volatility. If you would invest 53,800 in Schouw Co on November 30, 2024 and sell it today you would earn a total of 4,500 from holding Schouw Co or generate 8.36% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
GN Store Nord vs. Schouw Co
Performance |
| Timeline |
| GN Store Nord |
| Schouw |
GN Store and Schouw Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GN Store and Schouw
The main advantage of trading using opposite GN Store and Schouw positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GN Store position performs unexpectedly, Schouw 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 Schouw will offset losses from the drop in Schouw's long position.The idea behind GN Store Nord and Schouw Co 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.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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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