Correlation Between H Lundbeck and FLSmidth
Can any of the company-specific risk be diversified away by investing in both H Lundbeck and FLSmidth 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 H Lundbeck and FLSmidth into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between H Lundbeck AS and FLSmidth Co, you can compare the effects of market volatilities on H Lundbeck and FLSmidth 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 H Lundbeck with a short position of FLSmidth. Check out your portfolio center. Please also check ongoing floating volatility patterns of H Lundbeck and FLSmidth.
Diversification Opportunities for H Lundbeck and FLSmidth
-0.39 | Correlation Coefficient |
Very good diversification
The 3 months correlation between HLUN-B and FLSmidth is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding H Lundbeck AS and FLSmidth Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FLSmidth and H Lundbeck 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 H Lundbeck AS are associated (or correlated) with FLSmidth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FLSmidth has no effect on the direction of H Lundbeck i.e., H Lundbeck and FLSmidth go up and down completely randomly.
Pair Corralation between H Lundbeck and FLSmidth
Assuming the 90 days trading horizon H Lundbeck AS is expected to generate 0.84 times more return on investment than FLSmidth. However, H Lundbeck AS is 1.19 times less risky than FLSmidth. It trades about 0.08 of its potential returns per unit of risk. FLSmidth Co is currently generating about 0.06 per unit of risk. If you would invest 2,541 in H Lundbeck AS on August 29, 2024 and sell it today you would earn a total of 1,849 from holding H Lundbeck AS or generate 72.77% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
H Lundbeck AS vs. FLSmidth Co
Performance |
| Timeline |
| H Lundbeck AS |
| FLSmidth |
H Lundbeck and FLSmidth Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with H Lundbeck and FLSmidth
The main advantage of trading using opposite H Lundbeck and FLSmidth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if H Lundbeck position performs unexpectedly, FLSmidth 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 FLSmidth will offset losses from the drop in FLSmidth's long position.| H Lundbeck vs. H Lundbeck AS | H Lundbeck vs. GN Store Nord | H Lundbeck vs. FLSmidth Co | H Lundbeck vs. ALK Abell 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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