Correlation Between Coloplast and Pro Dex

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

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

Diversification Opportunities for Coloplast and Pro Dex

-0.57

Correlation Coefficient

Coloplast  Pro Dex

Excellent diversification

The 3 months correlation between Coloplast and Pro is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Coloplast A and Pro Dex in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pro Dex and Coloplast 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 Coloplast A are associated (or correlated) with Pro Dex. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pro Dex has no effect on the direction of Coloplast i.e., Coloplast and Pro Dex go up and down completely randomly.

Pair Corralation between Coloplast and Pro Dex

Assuming the 90 days horizon Coloplast A is expected to under-perform the Pro Dex. But the pink sheet apears to be less risky and, when comparing its historical volatility, Coloplast A is 3.38 times less risky than Pro Dex. The pink sheet trades about 0.0 of its potential returns per unit of risk. The Pro Dex is currently generating about 0.46 of returns per unit of risk over similar time horizon. If you would invest  2,835  in Pro Dex on August 17, 2024 and sell it today you would earn a total of  1,946  from holding Pro Dex or generate 68.64% return on investment over 90 days.

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

Coloplast A  vs.  Pro Dex

Coloplast A

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Coloplast A has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest inconsistent performance, the Stock's fundamental drivers remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pro Dex

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Pro Dex are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating technical and fundamental indicators, Pro Dex showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Coloplast and Pro Dex

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

The idea behind Coloplast A and Pro Dex 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.