Correlation Between ALK Abell and H Lundbeck

Can any of the company-specific risk be diversified away by investing in both ALK Abell and H Lundbeck 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 ALK Abell and H Lundbeck into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between ALK Abell AS and H Lundbeck AS, you can compare the effects of market volatilities on ALK Abell and H Lundbeck 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 ALK Abell with a short position of H Lundbeck. Check out your portfolio center. Please also check ongoing floating volatility patterns of ALK Abell and H Lundbeck.

Diversification Opportunities for ALK Abell and H Lundbeck

0.78

Correlation Coefficient

ALK Abell  H Lundbeck

Poor diversification

The 3 months correlation between ALK and HLUN-A is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding ALK Abell AS and H Lundbeck AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on H Lundbeck AS and ALK Abell 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 ALK Abell AS are associated (or correlated) with H Lundbeck. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of H Lundbeck AS has no effect on the direction of ALK Abell i.e., ALK Abell and H Lundbeck go up and down completely randomly.

Pair Corralation between ALK Abell and H Lundbeck

Assuming the 90 days trading horizon ALK Abell AS is expected to generate 1.2 times more return on investment than H Lundbeck. However, ALK Abell is 1.2 times more volatile than H Lundbeck AS. It trades about -0.03 of its potential returns per unit of risk. H Lundbeck AS is currently generating about -0.11 per unit of risk. If you would invest  17,070  in ALK Abell AS on September 5, 2024 and sell it today you would lose (840.00) from holding ALK Abell AS or give up 4.92% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

ALK Abell AS  vs.  H Lundbeck AS

ALK Abell AS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ALK Abell AS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, ALK Abell is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

H Lundbeck AS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days H Lundbeck AS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with ALK Abell and H Lundbeck

The main advantage of trading using opposite ALK Abell and H Lundbeck positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ALK Abell position performs unexpectedly, H Lundbeck 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 H Lundbeck will offset losses from the drop in H Lundbeck's long position.

The idea behind ALK Abell AS and H Lundbeck 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.

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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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.