Correlation Between Carlsberg and H Lundbeck

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

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

Diversification Opportunities for Carlsberg and H Lundbeck

-0.09

Correlation Coefficient

Carlsberg  H Lundbeck

Good diversification

The 3 months correlation between Carlsberg and HLUN-A is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Carlsberg AS and H Lundbeck AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on H Lundbeck 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 H Lundbeck. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of H Lundbeck AS has no effect on the direction of Carlsberg i.e., Carlsberg and H Lundbeck go up and down completely randomly.

Pair Corralation between Carlsberg and H Lundbeck

Assuming the 90 days trading horizon Carlsberg AS is expected to generate 3.64 times more return on investment than H Lundbeck. However, Carlsberg is 3.64 times more volatile than H Lundbeck AS. It trades about 0.06 of its potential returns per unit of risk. H Lundbeck AS is currently generating about -0.1 per unit of risk. If you would invest  89,400  in Carlsberg AS on December 4, 2024 and sell it today you would earn a total of  10,600  from holding Carlsberg AS or generate 11.86% return on investment over 90 days.

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

Carlsberg AS  vs.  H Lundbeck AS

Carlsberg AS

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Carlsberg AS are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Carlsberg sustained solid returns over the last few months and may actually be approaching a breakup point.

H Lundbeck AS

Risk-Adjusted Performance

Very Weak

Over the last 90 days H Lundbeck AS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Carlsberg and H Lundbeck

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

The idea behind Carlsberg AS and H Lundbeck 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.