Correlation Between CompuGroup Medical and Smurfit Kappa

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

By analyzing existing cross correlation between CompuGroup Medical SE and Smurfit Kappa Group, you can compare the effects of market volatilities on CompuGroup Medical and Smurfit Kappa 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 CompuGroup Medical with a short position of Smurfit Kappa. Check out your portfolio center. Please also check ongoing floating volatility patterns of CompuGroup Medical and Smurfit Kappa.

Diversification Opportunities for CompuGroup Medical and Smurfit Kappa

0.58

Correlation Coefficient

CompuGroup Medical  Smurfit Kappa

Very weak diversification

The 3 months correlation between CompuGroup and Smurfit is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding CompuGroup Medical SE and Smurfit Kappa Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Smurfit Kappa Group and CompuGroup Medical 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 CompuGroup Medical SE are associated (or correlated) with Smurfit Kappa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Smurfit Kappa Group has no effect on the direction of CompuGroup Medical i.e., CompuGroup Medical and Smurfit Kappa go up and down completely randomly.

Pair Corralation between CompuGroup Medical and Smurfit Kappa

Assuming the 90 days trading horizon CompuGroup Medical SE is expected to under-perform the Smurfit Kappa. In addition to that, CompuGroup Medical is 1.31 times more volatile than Smurfit Kappa Group. It trades about -0.02 of its total potential returns per unit of risk. Smurfit Kappa Group is currently generating about 0.04 per unit of volatility. If you would invest  3,527  in Smurfit Kappa Group on October 4, 2024 and sell it today you would earn a total of  1,643  from holding Smurfit Kappa Group or generate 46.58% return on investment over 90 days.

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

CompuGroup Medical SE  vs.  Smurfit Kappa Group

CompuGroup Medical

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CompuGroup Medical SE are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, CompuGroup Medical unveiled solid returns over the last few months and may actually be approaching a breakup point.

Smurfit Kappa Group

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Smurfit Kappa Group are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Smurfit Kappa reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CompuGroup Medical and Smurfit Kappa

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

The idea behind CompuGroup Medical SE and Smurfit Kappa Group 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.