Correlation Between Royal Unibrew and FLSmidth

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

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

Diversification Opportunities for Royal Unibrew and FLSmidth

0.0

Correlation Coefficient

Royal Unibrew  FLSmidth

Pay attention - limited upside

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

Pair Corralation between Royal Unibrew and FLSmidth

Assuming the 90 days trading horizon Royal Unibrew AS is expected to generate 0.68 times more return on investment than FLSmidth. However, Royal Unibrew AS is 1.46 times less risky than FLSmidth. It trades about 0.1 of its potential returns per unit of risk. FLSmidth Co is currently generating about -0.02 per unit of risk. 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

Royal Unibrew AS  vs.  FLSmidth Co

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.

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.

Pair Trading with Royal Unibrew and FLSmidth

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

The idea behind Royal Unibrew AS and FLSmidth Co 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .