Correlation Between FLSmidth and Royal Unibrew

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

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

Diversification Opportunities for FLSmidth and Royal Unibrew

0.0

Correlation Coefficient

FLSmidth  Royal Unibrew

Pay attention - limited upside

The 3 months correlation between FLSmidth and Royal is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding FLSmidth Co and Royal Unibrew AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Royal Unibrew AS and FLSmidth 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 FLSmidth Co are associated (or correlated) with Royal Unibrew. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Royal Unibrew AS has no effect on the direction of FLSmidth i.e., FLSmidth and Royal Unibrew go up and down completely randomly.

Pair Corralation between FLSmidth and Royal Unibrew

Assuming the 90 days trading horizon FLSmidth Co is expected to under-perform the Royal Unibrew. In addition to that, FLSmidth is 1.46 times more volatile than Royal Unibrew AS. It trades about -0.02 of its total potential returns per unit of risk. Royal Unibrew AS is currently generating about 0.1 per unit of volatility. If you would invest  51,300  in Royal Unibrew AS on December 31, 2024 and sell it today you would earn a total of  4,100  from holding Royal Unibrew AS or generate 7.99% return on investment over 90 days.

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

FLSmidth Co  vs.  Royal Unibrew AS

FLSmidth

Risk-Adjusted Performance

Very Weak

Over the last 90 days FLSmidth Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, FLSmidth is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Royal Unibrew AS

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Royal Unibrew AS are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak fundamental indicators, Royal Unibrew may actually be approaching a critical reversion point that can send shares even higher in May 2025.

Pair Trading with FLSmidth and Royal Unibrew

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

The idea behind FLSmidth Co and Royal Unibrew 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.

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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.