Correlation Between Zealand Pharma and CBrain AS

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

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

Diversification Opportunities for Zealand Pharma and CBrain AS

-0.19

Correlation Coefficient

Zealand Pharma  CBrain AS

Good diversification

The 3 months correlation between Zealand and CBrain is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Zealand Pharma AS and cBrain AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on cBrain AS and Zealand Pharma 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 Zealand Pharma AS are associated (or correlated) with CBrain AS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of cBrain AS has no effect on the direction of Zealand Pharma i.e., Zealand Pharma and CBrain AS go up and down completely randomly.

Pair Corralation between Zealand Pharma and CBrain AS

Assuming the 90 days trading horizon Zealand Pharma AS is expected to under-perform the CBrain AS. In addition to that, Zealand Pharma is 1.13 times more volatile than cBrain AS. It trades about -0.08 of its total potential returns per unit of risk. cBrain AS is currently generating about 0.04 per unit of volatility. If you would invest  19,700  in cBrain AS on August 31, 2024 and sell it today you would earn a total of  1,000.00  from holding cBrain AS or generate 5.08% return on investment over 90 days.

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

Zealand Pharma AS  vs.  cBrain AS

Zealand Pharma AS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Zealand Pharma AS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating 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.

cBrain AS

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in cBrain AS are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady basic indicators, CBrain AS may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Zealand Pharma and CBrain AS

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

The idea behind Zealand Pharma AS and cBrain 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.