Correlation Between Codan and Focus Universal

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

By analyzing existing cross correlation between Codan Limited and Focus Universal, you can compare the effects of market volatilities on Codan and Focus Universal 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 Codan with a short position of Focus Universal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Codan and Focus Universal.

Diversification Opportunities for Codan and Focus Universal

-0.72

Correlation Coefficient

Codan  Focus Universal

Pay attention - limited upside

The 3 months correlation between Codan and Focus is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Codan Limited and Focus Universal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Focus Universal and Codan 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 Codan Limited are associated (or correlated) with Focus Universal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Focus Universal has no effect on the direction of Codan i.e., Codan and Focus Universal go up and down completely randomly.

Pair Corralation between Codan and Focus Universal

Assuming the 90 days horizon Codan Limited is expected to generate 0.5 times more return on investment than Focus Universal. However, Codan Limited is 1.99 times less risky than Focus Universal. It trades about 0.12 of its potential returns per unit of risk. Focus Universal is currently generating about -0.06 per unit of risk. If you would invest  268.00  in Codan Limited on September 5, 2024 and sell it today you would earn a total of  462.00  from holding Codan Limited or generate 172.39% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	58.59%
Values	Daily Returns

Codan Limited  vs.  Focus Universal

Codan Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Codan Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Codan is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Focus Universal

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Focus Universal has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Focus Universal is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Codan and Focus Universal

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

The idea behind Codan Limited and Focus Universal 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.