Correlation Between FLSmidth and Tryg AS

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

Diversification Opportunities for FLSmidth and Tryg AS

0.63

Correlation Coefficient

FLSmidth  Tryg AS

Poor diversification

The 3 months correlation between FLSmidth and Tryg is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding FLSmidth Co and Tryg AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tryg 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 Tryg AS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tryg AS has no effect on the direction of FLSmidth i.e., FLSmidth and Tryg AS go up and down completely randomly.

Pair Corralation between FLSmidth and Tryg AS

Assuming the 90 days trading horizon FLSmidth Co is expected to generate 1.94 times more return on investment than Tryg AS. However, FLSmidth is 1.94 times more volatile than Tryg AS. It trades about 0.12 of its potential returns per unit of risk. Tryg AS is currently generating about 0.14 per unit of risk. If you would invest  34,280  in FLSmidth Co on September 1, 2024 and sell it today you would earn a total of  4,240  from holding FLSmidth Co or generate 12.37% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.48%
Values	Daily Returns

FLSmidth Co  vs.  Tryg AS

FLSmidth

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in FLSmidth Co are ranked lower than 9 (%) 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.

Tryg AS

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Tryg AS are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Tryg AS may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with FLSmidth and Tryg AS

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

The idea behind FLSmidth Co and Tryg 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.