Correlation Between Alefarm Brewing and Skjern Bank

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

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

Diversification Opportunities for Alefarm Brewing and Skjern Bank

-0.04

Correlation Coefficient

Alefarm Brewing  Skjern Bank

Good diversification

The 3 months correlation between Alefarm and Skjern is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Alefarm Brewing AS and Skjern Bank AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Skjern Bank AS and Alefarm Brewing 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 Alefarm Brewing AS are associated (or correlated) with Skjern Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Skjern Bank AS has no effect on the direction of Alefarm Brewing i.e., Alefarm Brewing and Skjern Bank go up and down completely randomly.

Pair Corralation between Alefarm Brewing and Skjern Bank

Assuming the 90 days trading horizon Alefarm Brewing AS is expected to under-perform the Skjern Bank. In addition to that, Alefarm Brewing is 1.45 times more volatile than Skjern Bank AS. It trades about -0.03 of its total potential returns per unit of risk. Skjern Bank AS is currently generating about 0.06 per unit of volatility. If you would invest  19,000  in Skjern Bank AS on September 15, 2024 and sell it today you would earn a total of  1,400  from holding Skjern Bank AS or generate 7.37% return on investment over 90 days.

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

Alefarm Brewing AS  vs.  Skjern Bank AS

Alefarm Brewing AS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alefarm Brewing AS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong technical and fundamental indicators, Alefarm Brewing is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Skjern Bank AS

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Skjern Bank AS are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Skjern Bank may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Alefarm Brewing and Skjern Bank

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

The idea behind Alefarm Brewing AS and Skjern 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.