Correlation Between PF BankNordik and Vestjysk Bank

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

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

Diversification Opportunities for PF BankNordik and Vestjysk Bank

-0.81

Correlation Coefficient

PF BankNordik  Vestjysk Bank

Pay attention - limited upside

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

Pair Corralation between PF BankNordik and Vestjysk Bank

Assuming the 90 days trading horizon PF BankNordik is expected to generate 0.97 times more return on investment than Vestjysk Bank. However, PF BankNordik is 1.03 times less risky than Vestjysk Bank. It trades about 0.18 of its potential returns per unit of risk. Vestjysk Bank AS is currently generating about -0.08 per unit of risk. If you would invest  15,400  in PF BankNordik on September 5, 2024 and sell it today you would earn a total of  1,000.00  from holding PF BankNordik or generate 6.49% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	80.0%
Values	Daily Returns

PF BankNordik  vs.  Vestjysk Bank AS

PF BankNordik

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days PF BankNordik has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite unfluctuating basic indicators, PF BankNordik may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Vestjysk Bank AS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vestjysk Bank AS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Vestjysk Bank is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with PF BankNordik and Vestjysk Bank

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

The idea behind PF BankNordik and Vestjysk 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.

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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.