Correlation Between Orsted AS and Scandinavian Brake

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

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

Diversification Opportunities for Orsted AS and Scandinavian Brake

-0.38

Correlation Coefficient

Orsted AS  Scandinavian Brake

Very good diversification

The 3 months correlation between Orsted and Scandinavian is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Orsted AS and Scandinavian Brake Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Scandinavian Brake and Orsted 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 Orsted AS are associated (or correlated) with Scandinavian Brake. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Scandinavian Brake has no effect on the direction of Orsted AS i.e., Orsted AS and Scandinavian Brake go up and down completely randomly.

Pair Corralation between Orsted AS and Scandinavian Brake

Assuming the 90 days trading horizon Orsted AS is expected to under-perform the Scandinavian Brake. But the stock apears to be less risky and, when comparing its historical volatility, Orsted AS is 1.76 times less risky than Scandinavian Brake. The stock trades about -0.03 of its potential returns per unit of risk. The Scandinavian Brake Systems is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  636.00  in Scandinavian Brake Systems on October 4, 2024 and sell it today you would earn a total of  584.00  from holding Scandinavian Brake Systems or generate 91.82% return on investment over 90 days.

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

Orsted AS  vs.  Scandinavian Brake Systems

Orsted AS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Orsted AS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Scandinavian Brake

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Orsted AS and Scandinavian Brake

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

The idea behind Orsted AS and Scandinavian Brake Systems 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.