Correlation Between Innovative Eyewear and Coloplast

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

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

Diversification Opportunities for Innovative Eyewear and Coloplast

0.1

Correlation Coefficient

Innovative Eyewear  Coloplast

Average diversification

The 3 months correlation between Innovative and Coloplast is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Innovative Eyewear and Coloplast A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coloplast A and Innovative Eyewear 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 Innovative Eyewear are associated (or correlated) with Coloplast. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Coloplast A has no effect on the direction of Innovative Eyewear i.e., Innovative Eyewear and Coloplast go up and down completely randomly.

Pair Corralation between Innovative Eyewear and Coloplast

Given the investment horizon of 90 days Innovative Eyewear is expected to generate 18.77 times more return on investment than Coloplast. However, Innovative Eyewear is 18.77 times more volatile than Coloplast A. It trades about 0.05 of its potential returns per unit of risk. Coloplast A is currently generating about 0.02 per unit of risk. If you would invest  858.00  in Innovative Eyewear on September 13, 2024 and sell it today you would lose (240.00) from holding Innovative Eyewear or give up 27.97% of portfolio value over 90 days.

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

Innovative Eyewear  vs.  Coloplast A

Innovative Eyewear

Risk-Adjusted Performance

6 of 100

Modest

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

Coloplast A

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Coloplast A has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's fundamental drivers remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Innovative Eyewear and Coloplast

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

The idea behind Innovative Eyewear and Coloplast A 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.