Correlation Between Nephros and Coloplast
Can any of the company-specific risk be diversified away by investing in both Nephros and Coloplast 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 Nephros and Coloplast into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nephros and Coloplast A, you can compare the effects of market volatilities on Nephros and Coloplast 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 Nephros with a short position of Coloplast. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nephros and Coloplast.
Diversification Opportunities for Nephros and Coloplast
Poor diversification
The 3 months correlation between Nephros and Coloplast is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Nephros and Coloplast A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coloplast A and Nephros 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 Nephros are associated (or correlated) with Coloplast. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Coloplast A has no effect on the direction of Nephros i.e., Nephros and Coloplast go up and down completely randomly.
Pair Corralation between Nephros and Coloplast
Given the investment horizon of 90 days Nephros is expected to generate 1.74 times more return on investment than Coloplast. However, Nephros is 1.74 times more volatile than Coloplast A. It trades about 0.11 of its potential returns per unit of risk. Coloplast A is currently generating about 0.04 per unit of risk. If you would invest 143.00 in Nephros on August 31, 2024 and sell it today you would earn a total of 8.00 from holding Nephros or generate 5.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nephros vs. Coloplast A
Performance |
| Timeline |
| Nephros |
| Coloplast A |
Nephros and Coloplast Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nephros and Coloplast
The main advantage of trading using opposite Nephros and Coloplast positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nephros position performs unexpectedly, Coloplast 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 Coloplast will offset losses from the drop in Coloplast's long position.| Nephros vs. Precision Optics, | Nephros vs. Repro Med Systems | Nephros vs. InfuSystems Holdings | Nephros vs. Utah Medical Products |
| Coloplast vs. Straumann Holding AG | Coloplast vs. Hoya Corp | Coloplast vs. EssilorLuxottica Socit anonyme | Coloplast vs. Essilor International SA |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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