Correlation Between Carlsberg and Scandinavian Brake

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

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

Diversification Opportunities for Carlsberg and Scandinavian Brake

-0.33

Correlation Coefficient

Carlsberg  Scandinavian Brake

Very good diversification

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

Pair Corralation between Carlsberg and Scandinavian Brake

Assuming the 90 days trading horizon Carlsberg AS is expected to under-perform the Scandinavian Brake. In addition to that, Carlsberg is 1.7 times more volatile than Scandinavian Brake Systems. It trades about -0.2 of its total potential returns per unit of risk. Scandinavian Brake Systems is currently generating about 0.12 per unit of volatility. If you would invest  1,165  in Scandinavian Brake Systems on October 10, 2024 and sell it today you would earn a total of  55.00  from holding Scandinavian Brake Systems or generate 4.72% 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.  Scandinavian Brake Systems

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 February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Scandinavian Brake

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Scandinavian Brake Systems are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Scandinavian Brake is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Carlsberg and Scandinavian Brake

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

The idea behind Carlsberg AS and Scandinavian Brake Systems 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..