Correlation Between FLSmidth and SKAKO AS

Can any of the company-specific risk be diversified away by investing in both FLSmidth and SKAKO 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 SKAKO 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 SKAKO AS, you can compare the effects of market volatilities on FLSmidth and SKAKO 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 SKAKO AS. Check out your portfolio center. Please also check ongoing floating volatility patterns of FLSmidth and SKAKO AS.

Diversification Opportunities for FLSmidth and SKAKO AS

-0.13

Correlation Coefficient

FLSmidth  SKAKO AS

Good diversification

The 3 months correlation between FLSmidth and SKAKO is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding FLSmidth Co and SKAKO AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SKAKO 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 SKAKO AS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SKAKO AS has no effect on the direction of FLSmidth i.e., FLSmidth and SKAKO AS go up and down completely randomly.

Pair Corralation between FLSmidth and SKAKO AS

Assuming the 90 days trading horizon FLSmidth Co is expected to generate 0.81 times more return on investment than SKAKO AS. However, FLSmidth Co is 1.24 times less risky than SKAKO AS. It trades about 0.16 of its potential returns per unit of risk. SKAKO AS is currently generating about 0.02 per unit of risk. If you would invest  33,120  in FLSmidth Co on September 3, 2024 and sell it today you would earn a total of  5,400  from holding FLSmidth Co or generate 16.3% return on investment over 90 days.

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

FLSmidth Co  vs.  SKAKO AS

FLSmidth

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in FLSmidth Co are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, FLSmidth displayed solid returns over the last few months and may actually be approaching a breakup point.

SKAKO AS

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in SKAKO AS are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, SKAKO AS is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with FLSmidth and SKAKO AS

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

The idea behind FLSmidth Co and SKAKO 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.