Correlation Between Chiba Bank and Sydbank A/S

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

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

Diversification Opportunities for Chiba Bank and Sydbank A/S

0.9

Correlation Coefficient

Chiba Bank  Sydbank A/S

Almost no diversification

The 3 months correlation between Chiba and Sydbank is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Chiba Bank and Sydbank AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sydbank A/S and Chiba Bank 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 Chiba Bank are associated (or correlated) with Sydbank A/S. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sydbank A/S has no effect on the direction of Chiba Bank i.e., Chiba Bank and Sydbank A/S go up and down completely randomly.

Pair Corralation between Chiba Bank and Sydbank A/S

Assuming the 90 days horizon Chiba Bank is expected to generate 1.08 times less return on investment than Sydbank A/S. But when comparing it to its historical volatility, Chiba Bank is 1.0 times less risky than Sydbank A/S. It trades about 0.23 of its potential returns per unit of risk. Sydbank AS is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  4,794  in Sydbank AS on December 22, 2024 and sell it today you would earn a total of  1,206  from holding Sydbank AS or generate 25.16% return on investment over 90 days.

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

Chiba Bank  vs.  Sydbank AS

Chiba Bank

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Chiba Bank are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Chiba Bank reported solid returns over the last few months and may actually be approaching a breakup point.

Sydbank A/S

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Sydbank AS are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Sydbank A/S reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Chiba Bank and Sydbank A/S

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

The idea behind Chiba Bank and Sydbank 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.