Correlation Between FLSmidth and Sparekassen Sjaelland

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

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

Diversification Opportunities for FLSmidth and Sparekassen Sjaelland

0.02

Correlation Coefficient

FLSmidth  Sparekassen Sjaelland

Significant diversification

The 3 months correlation between FLSmidth and Sparekassen is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding FLSmidth Co and Sparekassen Sjaelland Fyn AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sparekassen Sjaelland 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 Sparekassen Sjaelland. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sparekassen Sjaelland has no effect on the direction of FLSmidth i.e., FLSmidth and Sparekassen Sjaelland go up and down completely randomly.

Pair Corralation between FLSmidth and Sparekassen Sjaelland

Assuming the 90 days trading horizon FLSmidth Co is expected to generate 1.39 times more return on investment than Sparekassen Sjaelland. However, FLSmidth is 1.39 times more volatile than Sparekassen Sjaelland Fyn AS. It trades about 0.15 of its potential returns per unit of risk. Sparekassen Sjaelland Fyn AS is currently generating about 0.11 per unit of risk. If you would invest  33,160  in FLSmidth Co on September 13, 2024 and sell it today you would earn a total of  4,820  from holding FLSmidth Co or generate 14.54% return on investment over 90 days.

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

FLSmidth Co  vs.  Sparekassen Sjaelland Fyn AS

FLSmidth

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in FLSmidth Co are ranked lower than 11 (%) 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.

Sparekassen Sjaelland

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sparekassen Sjaelland Fyn AS are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating forward-looking signals, Sparekassen Sjaelland may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with FLSmidth and Sparekassen Sjaelland

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

The idea behind FLSmidth Co and Sparekassen Sjaelland Fyn 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.