Correlation Between Caixabank and Danske Bank

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

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

Diversification Opportunities for Caixabank and Danske Bank

0.97

Correlation Coefficient

Caixabank  Danske Bank

Almost no diversification

The 3 months correlation between Caixabank and Danske is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Caixabank SA ADR 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 Caixabank 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 Caixabank SA ADR 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 Caixabank i.e., Caixabank and Danske Bank go up and down completely randomly.

Pair Corralation between Caixabank and Danske Bank

Assuming the 90 days horizon Caixabank SA ADR is expected to generate 1.4 times more return on investment than Danske Bank. However, Caixabank is 1.4 times more volatile than Danske Bank AS. It trades about 0.27 of its potential returns per unit of risk. Danske Bank AS is currently generating about 0.23 per unit of risk. If you would invest  179.00  in Caixabank SA ADR on December 30, 2024 and sell it today you would earn a total of  81.00  from holding Caixabank SA ADR or generate 45.25% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Caixabank SA ADR  vs.  Danske Bank AS

Caixabank SA ADR

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Caixabank SA ADR are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Caixabank showed solid returns over the last few months and may actually be approaching a breakup point.

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 17 (%) 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 Caixabank and Danske Bank

The main advantage of trading using opposite Caixabank and Danske Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caixabank 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 Caixabank SA ADR 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.