Correlation Between BankInvest Optima and Skjern Bank

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

By analyzing existing cross correlation between BankInvest Optima 30 and Skjern Bank AS, you can compare the effects of market volatilities on BankInvest Optima 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 BankInvest Optima with a short position of Skjern Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of BankInvest Optima and Skjern Bank.

Diversification Opportunities for BankInvest Optima and Skjern Bank

0.11

Correlation Coefficient

BankInvest Optima  Skjern Bank

Average diversification

The 3 months correlation between BankInvest and Skjern is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding BankInvest Optima 30 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 BankInvest Optima 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 BankInvest Optima 30 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 BankInvest Optima i.e., BankInvest Optima and Skjern Bank go up and down completely randomly.

Pair Corralation between BankInvest Optima and Skjern Bank

Assuming the 90 days trading horizon BankInvest Optima is expected to generate 3.72 times less return on investment than Skjern Bank. But when comparing it to its historical volatility, BankInvest Optima 30 is 4.48 times less risky than Skjern Bank. It trades about 0.09 of its potential returns per unit of risk. Skjern Bank AS is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  12,072  in Skjern Bank AS on October 4, 2024 and sell it today you would earn a total of  8,928  from holding Skjern Bank AS or generate 73.96% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.78%
Values	Daily Returns

BankInvest Optima 30  vs.  Skjern Bank AS

BankInvest Optima

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in BankInvest Optima 30 are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, BankInvest Optima is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Skjern Bank AS

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Skjern Bank AS are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Skjern Bank displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BankInvest Optima and Skjern Bank

The main advantage of trading using opposite BankInvest Optima and Skjern Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BankInvest Optima 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 BankInvest Optima 30 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.