Correlation Between Blue Label and Ascendis Health

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

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

Diversification Opportunities for Blue Label and Ascendis Health

0.3

Correlation Coefficient

Blue Label  Ascendis Health

Weak diversification

The 3 months correlation between Blue and Ascendis is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Blue Label Telecoms and Ascendis Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ascendis Health and Blue Label 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 Blue Label Telecoms are associated (or correlated) with Ascendis Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ascendis Health has no effect on the direction of Blue Label i.e., Blue Label and Ascendis Health go up and down completely randomly.

Pair Corralation between Blue Label and Ascendis Health

Assuming the 90 days trading horizon Blue Label is expected to generate 2.35 times less return on investment than Ascendis Health. But when comparing it to its historical volatility, Blue Label Telecoms is 1.32 times less risky than Ascendis Health. It trades about 0.02 of its potential returns per unit of risk. Ascendis Health is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  6,200  in Ascendis Health on October 21, 2024 and sell it today you would earn a total of  2,500  from holding Ascendis Health or generate 40.32% return on investment over 90 days.

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

Blue Label Telecoms  vs.  Ascendis Health

Blue Label Telecoms

Risk-Adjusted Performance

0 of 100

Very Weak

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

Ascendis Health

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Ascendis Health are ranked lower than 6 (%) 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.

Pair Trading with Blue Label and Ascendis Health

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

The idea behind Blue Label Telecoms and Ascendis Health 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 Transaction History module to view history of all your transactions and understand their impact on performance.