Correlation Between ROCKWOOL International and ISS AS

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

Diversification Opportunities for ROCKWOOL International and ISS AS

0.39

Correlation Coefficient

ROCKWOOL International  ISS AS

Weak diversification

The 3 months correlation between ROCKWOOL and ISS is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding ROCKWOOL International AS and ISS AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ISS 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 ISS AS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ISS AS has no effect on the direction of ROCKWOOL International i.e., ROCKWOOL International and ISS AS go up and down completely randomly.

Pair Corralation between ROCKWOOL International and ISS AS

Assuming the 90 days trading horizon ROCKWOOL International is expected to generate 1.95 times less return on investment than ISS AS. In addition to that, ROCKWOOL International is 1.21 times more volatile than ISS AS. It trades about 0.08 of its total potential returns per unit of risk. ISS AS is currently generating about 0.2 per unit of volatility. If you would invest  12,800  in ISS AS on November 29, 2024 and sell it today you would earn a total of  3,460  from holding ISS AS or generate 27.03% return on investment over 90 days.

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

ROCKWOOL International AS  vs.  ISS 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 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating fundamental indicators, ROCKWOOL International sustained solid returns over the last few months and may actually be approaching a breakup point.

ISS AS

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ISS AS are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, ISS AS displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ROCKWOOL International and ISS AS

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

The idea behind ROCKWOOL International AS and ISS 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.

Check out your portfolio center.

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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.