Correlation Between WisdomTree Investments and DNB BANK

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

By analyzing existing cross correlation between WisdomTree Investments and DNB BANK ASA, you can compare the effects of market volatilities on WisdomTree Investments and DNB BANK 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 WisdomTree Investments with a short position of DNB BANK. Check out your portfolio center. Please also check ongoing floating volatility patterns of WisdomTree Investments and DNB BANK.

Diversification Opportunities for WisdomTree Investments and DNB BANK

0.81

Correlation Coefficient

WisdomTree Investments  DNB BANK

Very poor diversification

The 3 months correlation between WisdomTree and DNB is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree Investments and DNB BANK ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DNB BANK ASA and WisdomTree Investments 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 WisdomTree Investments are associated (or correlated) with DNB BANK. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DNB BANK ASA has no effect on the direction of WisdomTree Investments i.e., WisdomTree Investments and DNB BANK go up and down completely randomly.

Pair Corralation between WisdomTree Investments and DNB BANK

Assuming the 90 days horizon WisdomTree Investments is expected to generate 1.08 times less return on investment than DNB BANK. In addition to that, WisdomTree Investments is 1.31 times more volatile than DNB BANK ASA. It trades about 0.04 of its total potential returns per unit of risk. DNB BANK ASA is currently generating about 0.05 per unit of volatility. If you would invest  1,886  in DNB BANK ASA on October 6, 2024 and sell it today you would earn a total of  74.00  from holding DNB BANK ASA or generate 3.92% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	97.5%
Values	Daily Returns

WisdomTree Investments  vs.  DNB BANK ASA

WisdomTree Investments

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in WisdomTree Investments are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, WisdomTree Investments reported solid returns over the last few months and may actually be approaching a breakup point.

DNB BANK ASA

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in DNB BANK ASA are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, DNB BANK may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with WisdomTree Investments and DNB BANK

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

The idea behind WisdomTree Investments and DNB BANK ASA 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.