Correlation Between Danske Bank and Sparekassen Sjaelland

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

Diversification Opportunities for Danske Bank and Sparekassen Sjaelland

0.33

Correlation Coefficient

Danske Bank  Sparekassen Sjaelland

Weak diversification

The 3 months correlation between Danske and Sparekassen is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Danske Bank AS and Sparekassen Sjaelland Fyn AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sparekassen Sjaelland 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 Sparekassen Sjaelland. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sparekassen Sjaelland has no effect on the direction of Danske Bank i.e., Danske Bank and Sparekassen Sjaelland go up and down completely randomly.

Pair Corralation between Danske Bank and Sparekassen Sjaelland

Assuming the 90 days trading horizon Danske Bank AS is expected to under-perform the Sparekassen Sjaelland. In addition to that, Danske Bank is 1.41 times more volatile than Sparekassen Sjaelland Fyn AS. It trades about -0.03 of its total potential returns per unit of risk. Sparekassen Sjaelland Fyn AS is currently generating about -0.01 per unit of volatility. If you would invest  21,450  in Sparekassen Sjaelland Fyn AS on September 3, 2024 and sell it today you would lose (150.00) from holding Sparekassen Sjaelland Fyn AS or give up 0.7% of portfolio value over 90 days.

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

Danske Bank AS  vs.  Sparekassen Sjaelland Fyn AS

Danske Bank AS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Danske Bank AS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Danske Bank is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Sparekassen Sjaelland

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sparekassen Sjaelland Fyn AS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong forward-looking signals, Sparekassen Sjaelland is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Danske Bank and Sparekassen Sjaelland

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

The idea behind Danske Bank AS and Sparekassen Sjaelland Fyn 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.