Correlation Between Sparinvest INDEX and Coloplast

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

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

Diversification Opportunities for Sparinvest INDEX and Coloplast

-0.11

Correlation Coefficient

Sparinvest INDEX  Coloplast

Good diversification

The 3 months correlation between Sparinvest and Coloplast is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Sparinvest INDEX Globale and Coloplast AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coloplast AS and Sparinvest INDEX 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 Sparinvest INDEX Globale are associated (or correlated) with Coloplast. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Coloplast AS has no effect on the direction of Sparinvest INDEX i.e., Sparinvest INDEX and Coloplast go up and down completely randomly.

Pair Corralation between Sparinvest INDEX and Coloplast

Assuming the 90 days trading horizon Sparinvest INDEX Globale is expected to generate 0.41 times more return on investment than Coloplast. However, Sparinvest INDEX Globale is 2.43 times less risky than Coloplast. It trades about 0.19 of its potential returns per unit of risk. Coloplast AS is currently generating about -0.02 per unit of risk. If you would invest  14,367  in Sparinvest INDEX Globale on September 4, 2024 and sell it today you would earn a total of  1,069  from holding Sparinvest INDEX Globale or generate 7.44% return on investment over 90 days.

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

Sparinvest INDEX Globale  vs.  Coloplast AS

Sparinvest INDEX Globale

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sparinvest INDEX Globale are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of very conflicting basic indicators, Sparinvest INDEX may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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 somewhat strong essential indicators, Coloplast is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Sparinvest INDEX and Coloplast

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

The idea behind Sparinvest INDEX Globale and Coloplast 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.