Correlation Between Carlsberg and ChemoMetec

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

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

Diversification Opportunities for Carlsberg and ChemoMetec

-0.52

Correlation Coefficient

Carlsberg  ChemoMetec

Excellent diversification

The 3 months correlation between Carlsberg and ChemoMetec is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Carlsberg AS and ChemoMetec AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ChemoMetec AS and Carlsberg 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 Carlsberg AS are associated (or correlated) with ChemoMetec. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ChemoMetec AS has no effect on the direction of Carlsberg i.e., Carlsberg and ChemoMetec go up and down completely randomly.

Pair Corralation between Carlsberg and ChemoMetec

Assuming the 90 days trading horizon Carlsberg AS is expected to under-perform the ChemoMetec. But the stock apears to be less risky and, when comparing its historical volatility, Carlsberg AS is 2.79 times less risky than ChemoMetec. The stock trades about -0.16 of its potential returns per unit of risk. The ChemoMetec AS is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  37,300  in ChemoMetec AS on August 31, 2024 and sell it today you would earn a total of  10,700  from holding ChemoMetec AS or generate 28.69% return on investment over 90 days.

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

Carlsberg AS  vs.  ChemoMetec AS

Carlsberg AS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Carlsberg AS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

ChemoMetec AS

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ChemoMetec AS are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak fundamental indicators, ChemoMetec exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Carlsberg and ChemoMetec

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

The idea behind Carlsberg AS and ChemoMetec 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.