Correlation Between Ascendis Health and Octodec

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

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

Diversification Opportunities for Ascendis Health and Octodec

0.33

Correlation Coefficient

Ascendis Health  Octodec

Weak diversification

The 3 months correlation between Ascendis and Octodec is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Ascendis Health and Octodec in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Octodec 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 Octodec. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Octodec has no effect on the direction of Ascendis Health i.e., Ascendis Health and Octodec go up and down completely randomly.

Pair Corralation between Ascendis Health and Octodec

Assuming the 90 days trading horizon Ascendis Health is expected to generate 3.59 times more return on investment than Octodec. However, Ascendis Health is 3.59 times more volatile than Octodec. It trades about -0.03 of its potential returns per unit of risk. Octodec is currently generating about -0.18 per unit of risk. If you would invest  9,000  in Ascendis Health on December 24, 2024 and sell it today you would lose (1,000.00) from holding Ascendis Health or give up 11.11% of portfolio value over 90 days.

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

Ascendis Health  vs.  Octodec

Ascendis Health

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ascendis Health has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Octodec

Risk-Adjusted Performance

Very Weak

Over the last 90 days Octodec has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Ascendis Health and Octodec

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

The idea behind Ascendis Health and Octodec 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.