Correlation Between Zealand Pharma and Columbus

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

Diversification Opportunities for Zealand Pharma and Columbus

-0.26

Correlation Coefficient

Zealand Pharma  Columbus

Very good diversification

The 3 months correlation between Zealand and Columbus is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Zealand Pharma AS and Columbus AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Columbus 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 Columbus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Columbus AS has no effect on the direction of Zealand Pharma i.e., Zealand Pharma and Columbus go up and down completely randomly.

Pair Corralation between Zealand Pharma and Columbus

Assuming the 90 days trading horizon Zealand Pharma AS is expected to under-perform the Columbus. In addition to that, Zealand Pharma is 1.38 times more volatile than Columbus AS. It trades about -0.05 of its total potential returns per unit of risk. Columbus AS is currently generating about 0.12 per unit of volatility. If you would invest  884.00  in Columbus AS on September 14, 2024 and sell it today you would earn a total of  141.00  from holding Columbus AS or generate 15.95% 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.  Columbus 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 latest unfluctuating performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Columbus AS

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Columbus AS are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating fundamental indicators, Columbus exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Zealand Pharma and Columbus

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

The idea behind Zealand Pharma AS and Columbus 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.

Check out your portfolio center.

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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.