Correlation Between SP Group and Schouw

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

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

Diversification Opportunities for SP Group and Schouw

0.71

Correlation Coefficient

SP Group  Schouw

Poor diversification

The 3 months correlation between SPG and Schouw is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding SP Group AS and Schouw Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Schouw and SP Group 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 SP Group 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 SP Group i.e., SP Group and Schouw go up and down completely randomly.

Pair Corralation between SP Group and Schouw

Assuming the 90 days trading horizon SP Group is expected to generate 2.21 times less return on investment than Schouw. In addition to that, SP Group is 2.04 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 0.16 per unit of volatility. If you would invest  55,200  in Schouw Co on December 2, 2024 and sell it today you would earn a total of  3,100  from holding Schouw Co or generate 5.62% return on investment over 90 days.

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

SP Group AS  vs.  Schouw Co

SP Group AS

Risk-Adjusted Performance

Very Weak

Over the last 90 days SP Group AS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, SP Group is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Schouw

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Schouw Co are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. 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 SP Group and Schouw

The main advantage of trading using opposite SP Group and Schouw positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SP Group 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 SP Group 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 Stocks Directory module to find actively traded stocks across global markets.