Correlation Between Danske Bank and Carlsberg

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

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

Diversification Opportunities for Danske Bank and Carlsberg

-0.73

Correlation Coefficient

Danske Bank  Carlsberg

Pay attention - limited upside

The 3 months correlation between Danske and Carlsberg is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding Danske Bank AS and Carlsberg AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Carlsberg AS and Danske 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 Danske Bank AS are associated (or correlated) with Carlsberg. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Carlsberg AS has no effect on the direction of Danske Bank i.e., Danske Bank and Carlsberg go up and down completely randomly.

Pair Corralation between Danske Bank and Carlsberg

Assuming the 90 days trading horizon Danske Bank AS is expected to generate 0.75 times more return on investment than Carlsberg. However, Danske Bank AS is 1.33 times less risky than Carlsberg. It trades about 0.11 of its potential returns per unit of risk. Carlsberg AS is currently generating about -0.15 per unit of risk. If you would invest  18,981  in Danske Bank AS on October 9, 2024 and sell it today you would earn a total of  1,459  from holding Danske Bank AS or generate 7.69% return on investment over 90 days.

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

Danske Bank AS  vs.  Carlsberg AS

Danske Bank AS

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Danske Bank AS are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating basic indicators, Danske Bank may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Carlsberg AS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Carlsberg AS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Danske Bank and Carlsberg

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

The idea behind Danske Bank AS and Carlsberg 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.