Correlation Between ROCKWOOL International and Coloplast

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

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

Diversification Opportunities for ROCKWOOL International and Coloplast

0.07

Correlation Coefficient

ROCKWOOL International  Coloplast

Significant diversification

The 3 months correlation between ROCKWOOL and Coloplast is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding ROCKWOOL International AS and Coloplast AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coloplast AS and ROCKWOOL International 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 ROCKWOOL International AS 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 AS has no effect on the direction of ROCKWOOL International i.e., ROCKWOOL International and Coloplast go up and down completely randomly.

Pair Corralation between ROCKWOOL International and Coloplast

Assuming the 90 days trading horizon ROCKWOOL International AS is expected to generate 2.48 times more return on investment than Coloplast. However, ROCKWOOL International is 2.48 times more volatile than Coloplast AS. It trades about 0.07 of its potential returns per unit of risk. Coloplast AS is currently generating about -0.22 per unit of risk. If you would invest  257,800  in ROCKWOOL International AS on December 1, 2024 and sell it today you would earn a total of  25,200  from holding ROCKWOOL International AS or generate 9.78% return on investment over 90 days.

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

ROCKWOOL International AS  vs.  Coloplast AS

ROCKWOOL International

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in ROCKWOOL International AS are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating fundamental indicators, ROCKWOOL International may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Coloplast AS

Risk-Adjusted Performance

Very Weak

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

Pair Trading with ROCKWOOL International and Coloplast

The main advantage of trading using opposite ROCKWOOL International and Coloplast positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ROCKWOOL International 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 ROCKWOOL International AS and Coloplast 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.