Correlation Between Ambu AS and CBrain AS

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

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

Diversification Opportunities for Ambu AS and CBrain AS

-0.35

Correlation Coefficient

Ambu AS  CBrain AS

Very good diversification

The 3 months correlation between Ambu and CBrain is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Ambu AS and cBrain AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on cBrain AS and Ambu AS 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 Ambu 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 Ambu AS i.e., Ambu AS and CBrain AS go up and down completely randomly.

Pair Corralation between Ambu AS and CBrain AS

Assuming the 90 days trading horizon Ambu AS is expected to generate 0.65 times more return on investment than CBrain AS. However, Ambu AS is 1.53 times less risky than CBrain AS. It trades about 0.14 of its potential returns per unit of risk. cBrain AS is currently generating about -0.11 per unit of risk. If you would invest  11,062  in Ambu AS on November 29, 2024 and sell it today you would earn a total of  2,553  from holding Ambu AS or generate 23.08% return on investment over 90 days.

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

Ambu AS  vs.  cBrain AS

Ambu AS

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ambu AS are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating fundamental drivers, Ambu AS sustained solid returns over the last few months and may actually be approaching a breakup point.

cBrain AS

Risk-Adjusted Performance

Very Weak

Over the last 90 days cBrain AS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Ambu AS and CBrain AS

The main advantage of trading using opposite Ambu AS and CBrain AS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ambu AS 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 Ambu 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.