Correlation Between ROCKWOOL International and FLSmidth
Can any of the company-specific risk be diversified away by investing in both ROCKWOOL International 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 ROCKWOOL International and FLSmidth into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ROCKWOOL International AS and FLSmidth Co, you can compare the effects of market volatilities on ROCKWOOL International 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 ROCKWOOL International with a short position of FLSmidth. Check out your portfolio center. Please also check ongoing floating volatility patterns of ROCKWOOL International and FLSmidth.
Diversification Opportunities for ROCKWOOL International and FLSmidth
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between ROCKWOOL and FLSmidth is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding ROCKWOOL International AS and FLSmidth Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FLSmidth and ROCKWOOL International 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 ROCKWOOL International 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 ROCKWOOL International i.e., ROCKWOOL International and FLSmidth go up and down completely randomly.
Pair Corralation between ROCKWOOL International and FLSmidth
Assuming the 90 days trading horizon ROCKWOOL International AS is expected to generate 0.98 times more return on investment than FLSmidth. However, ROCKWOOL International AS is 1.02 times less risky than FLSmidth. It trades about 0.12 of its potential returns per unit of risk. FLSmidth Co is currently generating about 0.05 per unit of risk. If you would invest 165,486 in ROCKWOOL International AS on August 25, 2024 and sell it today you would earn a total of 132,714 from holding ROCKWOOL International AS or generate 80.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
ROCKWOOL International AS vs. FLSmidth Co
Performance |
| Timeline |
| ROCKWOOL International |
| FLSmidth |
ROCKWOOL International and FLSmidth Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ROCKWOOL International and FLSmidth
The main advantage of trading using opposite ROCKWOOL International and FLSmidth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ROCKWOOL International 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.| ROCKWOOL International vs. FLSmidth Co | ROCKWOOL International vs. GN Store Nord | ROCKWOOL International vs. Ambu AS | ROCKWOOL International vs. DSV Panalpina 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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