Correlation Between Investec PLC and Ascendis Health

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

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

Diversification Opportunities for Investec PLC and Ascendis Health

-0.69

Correlation Coefficient

Investec PLC  Ascendis Health

Excellent diversification

The 3 months correlation between Investec and Ascendis is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Investec PLC and Ascendis Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ascendis Health and Investec PLC 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 Investec PLC are associated (or correlated) with Ascendis Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ascendis Health has no effect on the direction of Investec PLC i.e., Investec PLC and Ascendis Health go up and down completely randomly.

Pair Corralation between Investec PLC and Ascendis Health

Assuming the 90 days trading horizon Investec PLC is expected to under-perform the Ascendis Health. But the stock apears to be less risky and, when comparing its historical volatility, Investec PLC is 2.83 times less risky than Ascendis Health. The stock trades about -0.07 of its potential returns per unit of risk. The Ascendis Health is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  7,200  in Ascendis Health on October 24, 2024 and sell it today you would earn a total of  1,300  from holding Ascendis Health or generate 18.06% return on investment over 90 days.

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

Investec PLC  vs.  Ascendis Health

Investec PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Investec PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Investec PLC is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Ascendis Health

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Ascendis Health are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak technical and fundamental indicators, Ascendis Health exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Investec PLC and Ascendis Health

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

The idea behind Investec PLC and Ascendis Health 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.