Correlation Between Scandinavian Medical and DecideAct

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

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

Diversification Opportunities for Scandinavian Medical and DecideAct

0.37

Correlation Coefficient

Scandinavian Medical  DecideAct

Weak diversification

The 3 months correlation between Scandinavian and DecideAct is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Scandinavian Medical Solutions and DecideAct AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DecideAct AS and Scandinavian Medical 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 Scandinavian Medical Solutions are associated (or correlated) with DecideAct. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DecideAct AS has no effect on the direction of Scandinavian Medical i.e., Scandinavian Medical and DecideAct go up and down completely randomly.

Pair Corralation between Scandinavian Medical and DecideAct

Assuming the 90 days trading horizon Scandinavian Medical Solutions is expected to generate 0.43 times more return on investment than DecideAct. However, Scandinavian Medical Solutions is 2.35 times less risky than DecideAct. It trades about -0.02 of its potential returns per unit of risk. DecideAct AS is currently generating about -0.02 per unit of risk. If you would invest  640.00  in Scandinavian Medical Solutions on September 12, 2024 and sell it today you would lose (34.00) from holding Scandinavian Medical Solutions or give up 5.31% of portfolio value over 90 days.

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

Scandinavian Medical Solutions  vs.  DecideAct AS

Scandinavian Medical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Scandinavian Medical Solutions has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Scandinavian Medical is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

DecideAct AS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DecideAct AS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Scandinavian Medical and DecideAct

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

The idea behind Scandinavian Medical Solutions and DecideAct 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.