Correlation Between Coloplast and Scandinavian Brake

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

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

Diversification Opportunities for Coloplast and Scandinavian Brake

-0.41

Correlation Coefficient

Coloplast  Scandinavian Brake

Very good diversification

The 3 months correlation between Coloplast and Scandinavian is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Coloplast AS and Scandinavian Brake Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Scandinavian Brake and Coloplast 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 Coloplast AS are associated (or correlated) with Scandinavian Brake. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Scandinavian Brake has no effect on the direction of Coloplast i.e., Coloplast and Scandinavian Brake go up and down completely randomly.

Pair Corralation between Coloplast and Scandinavian Brake

Assuming the 90 days trading horizon Coloplast AS is expected to under-perform the Scandinavian Brake. In addition to that, Coloplast is 1.09 times more volatile than Scandinavian Brake Systems. It trades about -0.11 of its total potential returns per unit of risk. Scandinavian Brake Systems is currently generating about 0.05 per unit of volatility. If you would invest  1,180  in Scandinavian Brake Systems on September 13, 2024 and sell it today you would earn a total of  40.00  from holding Scandinavian Brake Systems or generate 3.39% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.46%
Values	Daily Returns

Coloplast AS  vs.  Scandinavian Brake Systems

Coloplast AS

Risk-Adjusted Performance

0 of 100

Very Weak

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

Scandinavian Brake

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Scandinavian Brake Systems are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Scandinavian Brake is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Coloplast and Scandinavian Brake

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

The idea behind Coloplast AS and Scandinavian Brake Systems 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 Stocks Directory module to find actively traded stocks across global markets.