Correlation Between Royal Unibrew and Schouw

Can any of the company-specific risk be diversified away by investing in both Royal Unibrew and Schouw 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 Schouw 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 Schouw Co, you can compare the effects of market volatilities on Royal Unibrew and Schouw 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 Schouw. Check out your portfolio center. Please also check ongoing floating volatility patterns of Royal Unibrew and Schouw.

Diversification Opportunities for Royal Unibrew and Schouw

0.5

Correlation Coefficient

Royal Unibrew  Schouw

Very weak diversification

The 3 months correlation between Royal and Schouw is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Royal Unibrew AS and Schouw Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Schouw 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 Schouw. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Schouw has no effect on the direction of Royal Unibrew i.e., Royal Unibrew and Schouw go up and down completely randomly.

Pair Corralation between Royal Unibrew and Schouw

Assuming the 90 days trading horizon Royal Unibrew AS is expected to under-perform the Schouw. In addition to that, Royal Unibrew is 1.35 times more volatile than Schouw Co. It trades about -0.03 of its total potential returns per unit of risk. Schouw Co is currently generating about -0.02 per unit of volatility. If you would invest  57,100  in Schouw Co on September 5, 2024 and sell it today you would lose (2,100) from holding Schouw Co or give up 3.68% of portfolio value over 90 days.

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

Royal Unibrew AS  vs.  Schouw Co

Royal Unibrew AS

Risk-Adjusted Performance

0 of 100

Very Weak

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

Schouw

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Schouw Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Schouw 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 Schouw

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

The idea behind Royal Unibrew AS and Schouw 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.