Correlation Between Ascendis Health and Nampak

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

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

Diversification Opportunities for Ascendis Health and Nampak

-0.64

Correlation Coefficient

Ascendis Health  Nampak

Excellent diversification

The 3 months correlation between Ascendis and Nampak is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Ascendis Health and Nampak in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nampak and Ascendis Health 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 Ascendis Health are associated (or correlated) with Nampak. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nampak has no effect on the direction of Ascendis Health i.e., Ascendis Health and Nampak go up and down completely randomly.

Pair Corralation between Ascendis Health and Nampak

Assuming the 90 days trading horizon Ascendis Health is expected to generate 4.08 times more return on investment than Nampak. However, Ascendis Health is 4.08 times more volatile than Nampak. It trades about 0.1 of its potential returns per unit of risk. Nampak is currently generating about -0.37 per unit of risk. If you would invest  7,800  in Ascendis Health on October 16, 2024 and sell it today you would earn a total of  600.00  from holding Ascendis Health or generate 7.69% return on investment over 90 days.

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

Ascendis Health  vs.  Nampak

Ascendis Health

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Ascendis Health are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Ascendis Health exhibited solid returns over the last few months and may actually be approaching a breakup point.

Nampak

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nampak has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Nampak is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Ascendis Health and Nampak

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

The idea behind Ascendis Health and Nampak 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.