Correlation Between Scandinavian Medical and Danske Invest

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

Diversification Opportunities for Scandinavian Medical and Danske Invest

0.38

Correlation Coefficient

Scandinavian Medical  Danske Invest

Weak diversification

The 3 months correlation between Scandinavian and Danske is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Scandinavian Medical Solutions and Danske Invest Danmark in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Danske Invest Danmark 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 Danske Invest. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Danske Invest Danmark has no effect on the direction of Scandinavian Medical i.e., Scandinavian Medical and Danske Invest go up and down completely randomly.

Pair Corralation between Scandinavian Medical and Danske Invest

Assuming the 90 days trading horizon Scandinavian Medical Solutions is expected to generate 3.13 times more return on investment than Danske Invest. However, Scandinavian Medical is 3.13 times more volatile than Danske Invest Danmark. It trades about 0.01 of its potential returns per unit of risk. Danske Invest Danmark is currently generating about -0.08 per unit of risk. If you would invest  606.00  in Scandinavian Medical Solutions on October 4, 2024 and sell it today you would lose (10.00) from holding Scandinavian Medical Solutions or give up 1.65% 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.  Danske Invest Danmark

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.

Danske Invest Danmark

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Danske Invest Danmark has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Scandinavian Medical and Danske Invest

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

The idea behind Scandinavian Medical Solutions and Danske Invest Danmark 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.