Correlation Between FLSmidth and Genmab AS

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

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

Diversification Opportunities for FLSmidth and Genmab AS

-0.85

Correlation Coefficient

FLSmidth  Genmab AS

Pay attention - limited upside

The 3 months correlation between FLSmidth and Genmab is -0.85. Overlapping area represents the amount of risk that can be diversified away by holding FLSmidth Co and Genmab AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Genmab AS and FLSmidth 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 FLSmidth Co are associated (or correlated) with Genmab AS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Genmab AS has no effect on the direction of FLSmidth i.e., FLSmidth and Genmab AS go up and down completely randomly.

Pair Corralation between FLSmidth and Genmab AS

Assuming the 90 days trading horizon FLSmidth Co is expected to generate 0.76 times more return on investment than Genmab AS. However, FLSmidth Co is 1.32 times less risky than Genmab AS. It trades about 0.15 of its potential returns per unit of risk. Genmab AS is currently generating about -0.06 per unit of risk. If you would invest  36,400  in FLSmidth Co on August 31, 2024 and sell it today you would earn a total of  1,680  from holding FLSmidth Co or generate 4.62% return on investment over 90 days.

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

FLSmidth Co  vs.  Genmab AS

FLSmidth

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in FLSmidth Co are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, FLSmidth may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Genmab AS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Genmab AS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in December 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with FLSmidth and Genmab AS

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

The idea behind FLSmidth Co and Genmab 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.