Correlation Between Alm Brand and Schouw

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

By analyzing existing cross correlation between Alm Brand and Schouw Co, you can compare the effects of market volatilities on Alm Brand and Schouw 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 Alm Brand with a short position of Schouw. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alm Brand and Schouw.

Diversification Opportunities for Alm Brand and Schouw

0.89

Correlation Coefficient

Alm Brand  Schouw

Very poor diversification

The 3 months correlation between Alm and Schouw is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Alm Brand and Schouw Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Schouw and Alm Brand 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 Alm Brand are associated (or correlated) with Schouw. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Schouw has no effect on the direction of Alm Brand i.e., Alm Brand and Schouw go up and down completely randomly.

Pair Corralation between Alm Brand and Schouw

Assuming the 90 days trading horizon Alm Brand is expected to generate 1.04 times more return on investment than Schouw. However, Alm Brand is 1.04 times more volatile than Schouw Co. It trades about 0.23 of its potential returns per unit of risk. Schouw Co is currently generating about 0.21 per unit of risk. If you would invest  1,403  in Alm Brand on December 29, 2024 and sell it today you would earn a total of  257.00  from holding Alm Brand or generate 18.32% return on investment over 90 days.

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

Alm Brand  vs.  Schouw Co

Alm Brand

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Alm Brand are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Alm Brand displayed solid returns over the last few months and may actually be approaching a breakup point.

Schouw

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Schouw Co are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Schouw displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Alm Brand and Schouw

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

The idea behind Alm Brand and Schouw Co 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.