Correlation Between Utah Medical and Coloplast A/S

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

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

Diversification Opportunities for Utah Medical and Coloplast A/S

0.58

Correlation Coefficient

Utah Medical  Coloplast A/S

Very weak diversification

The 3 months correlation between Utah and Coloplast is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Utah Medical Products and Coloplast AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coloplast A/S and Utah 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 Utah Medical Products are associated (or correlated) with Coloplast A/S. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Coloplast A/S has no effect on the direction of Utah Medical i.e., Utah Medical and Coloplast A/S go up and down completely randomly.

Pair Corralation between Utah Medical and Coloplast A/S

Given the investment horizon of 90 days Utah Medical Products is expected to under-perform the Coloplast A/S. But the stock apears to be less risky and, when comparing its historical volatility, Utah Medical Products is 1.29 times less risky than Coloplast A/S. The stock trades about -0.14 of its potential returns per unit of risk. The Coloplast AS is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  10,911  in Coloplast AS on December 29, 2024 and sell it today you would lose (496.00) from holding Coloplast AS or give up 4.55% of portfolio value over 90 days.

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

Utah Medical Products  vs.  Coloplast AS

Utah Medical Products

Risk-Adjusted Performance

Very Weak

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

Coloplast A/S

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 nearly stable fundamental drivers, Coloplast A/S is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Utah Medical and Coloplast A/S

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

The idea behind Utah Medical Products 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..