Correlation Between Danske Bank and Groenlandsbanken

Can any of the company-specific risk be diversified away by investing in both Danske Bank and Groenlandsbanken 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 Groenlandsbanken 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 Groenlandsbanken AS, you can compare the effects of market volatilities on Danske Bank and Groenlandsbanken 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 Groenlandsbanken. Check out your portfolio center. Please also check ongoing floating volatility patterns of Danske Bank and Groenlandsbanken.

Diversification Opportunities for Danske Bank and Groenlandsbanken

0.78

Correlation Coefficient

Danske Bank  Groenlandsbanken

Poor diversification

The 3 months correlation between Danske and Groenlandsbanken is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Danske Bank AS and Groenlandsbanken AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Groenlandsbanken 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 Groenlandsbanken. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Groenlandsbanken has no effect on the direction of Danske Bank i.e., Danske Bank and Groenlandsbanken go up and down completely randomly.

Pair Corralation between Danske Bank and Groenlandsbanken

Assuming the 90 days trading horizon Danske Bank AS is expected to generate 0.84 times more return on investment than Groenlandsbanken. However, Danske Bank AS is 1.19 times less risky than Groenlandsbanken. It trades about 0.23 of its potential returns per unit of risk. Groenlandsbanken AS is currently generating about 0.1 per unit of risk. If you would invest  19,587  in Danske Bank AS on December 2, 2024 and sell it today you would earn a total of  4,543  from holding Danske Bank AS or generate 23.19% return on investment over 90 days.

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

Danske Bank AS  vs.  Groenlandsbanken AS

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 18 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating basic indicators, Danske Bank sustained solid returns over the last few months and may actually be approaching a breakup point.

Groenlandsbanken

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Groenlandsbanken AS are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Groenlandsbanken may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Danske Bank and Groenlandsbanken

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

The idea behind Danske Bank AS and Groenlandsbanken 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.