Correlation Between ISS AS and ROCKWOOL International

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

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

Diversification Opportunities for ISS AS and ROCKWOOL International

0.87

Correlation Coefficient

ISS AS  ROCKWOOL International

Very poor diversification

The 3 months correlation between ISS and ROCKWOOL is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding ISS AS and ROCKWOOL International AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ROCKWOOL International and ISS AS 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 ISS AS are associated (or correlated) with ROCKWOOL International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ROCKWOOL International has no effect on the direction of ISS AS i.e., ISS AS and ROCKWOOL International go up and down completely randomly.

Pair Corralation between ISS AS and ROCKWOOL International

Assuming the 90 days trading horizon ISS AS is expected to generate 0.68 times more return on investment than ROCKWOOL International. However, ISS AS is 1.48 times less risky than ROCKWOOL International. It trades about 0.16 of its potential returns per unit of risk. ROCKWOOL International AS is currently generating about 0.1 per unit of risk. If you would invest  13,130  in ISS AS on December 30, 2024 and sell it today you would earn a total of  2,990  from holding ISS AS or generate 22.77% return on investment over 90 days.

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

ISS AS  vs.  ROCKWOOL International AS

ISS AS

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ISS AS are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, ISS AS displayed solid returns over the last few months and may actually be approaching a breakup point.

ROCKWOOL International

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ROCKWOOL International AS are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating fundamental indicators, ROCKWOOL International sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ISS AS and ROCKWOOL International

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

The idea behind ISS AS and ROCKWOOL International 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.