Correlation Between Scandinavian Brake and Dampskibsselskabet

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

By analyzing existing cross correlation between Scandinavian Brake Systems and Dampskibsselskabet Norden AS, you can compare the effects of market volatilities on Scandinavian Brake and Dampskibsselskabet 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 Scandinavian Brake with a short position of Dampskibsselskabet. Check out your portfolio center. Please also check ongoing floating volatility patterns of Scandinavian Brake and Dampskibsselskabet.

Diversification Opportunities for Scandinavian Brake and Dampskibsselskabet

0.45

Correlation Coefficient

Scandinavian Brake  Dampskibsselskabet

Very weak diversification

The 3 months correlation between Scandinavian and Dampskibsselskabet is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Scandinavian Brake Systems and Dampskibsselskabet Norden AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dampskibsselskabet and Scandinavian Brake 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 Scandinavian Brake Systems are associated (or correlated) with Dampskibsselskabet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dampskibsselskabet has no effect on the direction of Scandinavian Brake i.e., Scandinavian Brake and Dampskibsselskabet go up and down completely randomly.

Pair Corralation between Scandinavian Brake and Dampskibsselskabet

Assuming the 90 days trading horizon Scandinavian Brake Systems is expected to under-perform the Dampskibsselskabet. In addition to that, Scandinavian Brake is 1.09 times more volatile than Dampskibsselskabet Norden AS. It trades about -0.07 of its total potential returns per unit of risk. Dampskibsselskabet Norden AS is currently generating about 0.03 per unit of volatility. If you would invest  31,252  in Dampskibsselskabet Norden AS on February 21, 2024 and sell it today you would earn a total of  2,008  from holding Dampskibsselskabet Norden AS or generate 6.43% return on investment over 90 days.

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

Scandinavian Brake Systems  vs.  Dampskibsselskabet Norden AS

Scandinavian Brake

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Scandinavian Brake Systems are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Scandinavian Brake may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Dampskibsselskabet

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Dampskibsselskabet Norden AS are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak fundamental indicators, Dampskibsselskabet exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Scandinavian Brake and Dampskibsselskabet

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

The idea behind Scandinavian Brake Systems and Dampskibsselskabet Norden 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.