Correlation Between Alcoa Corp and Danske Bank

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

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

Diversification Opportunities for Alcoa Corp and Danske Bank

-0.74

Correlation Coefficient

Alcoa Corp  Danske Bank

Pay attention - limited upside

The 3 months correlation between Alcoa and Danske is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Alcoa Corp and Danske Bank AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Danske Bank AS and Alcoa Corp 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 Alcoa Corp are associated (or correlated) with Danske Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Danske Bank AS has no effect on the direction of Alcoa Corp i.e., Alcoa Corp and Danske Bank go up and down completely randomly.

Pair Corralation between Alcoa Corp and Danske Bank

Allowing for the 90-day total investment horizon Alcoa Corp is expected to under-perform the Danske Bank. In addition to that, Alcoa Corp is 1.73 times more volatile than Danske Bank AS. It trades about -0.07 of its total potential returns per unit of risk. Danske Bank AS is currently generating about 0.26 per unit of volatility. If you would invest  1,351  in Danske Bank AS on December 28, 2024 and sell it today you would earn a total of  389.00  from holding Danske Bank AS or generate 28.79% return on investment over 90 days.

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

Alcoa Corp  vs.  Danske Bank AS

Alcoa Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Alcoa Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Danske Bank AS

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Danske Bank AS are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak technical and fundamental indicators, Danske Bank showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Alcoa Corp and Danske Bank

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

The idea behind Alcoa Corp and Danske Bank 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..