Correlation Between Danske Invest and BankInvest Optima

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

By analyzing existing cross correlation between Danske Invest Euro and BankInvest Optima 30, you can compare the effects of market volatilities on Danske Invest and BankInvest Optima 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 Invest with a short position of BankInvest Optima. Check out your portfolio center. Please also check ongoing floating volatility patterns of Danske Invest and BankInvest Optima.

Diversification Opportunities for Danske Invest and BankInvest Optima

0.92

Correlation Coefficient

Danske Invest  BankInvest Optima

Almost no diversification

The 3 months correlation between Danske and BankInvest is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Danske Invest Euro and BankInvest Optima 30 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BankInvest Optima and Danske Invest 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 Invest Euro are associated (or correlated) with BankInvest Optima. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BankInvest Optima has no effect on the direction of Danske Invest i.e., Danske Invest and BankInvest Optima go up and down completely randomly.

Pair Corralation between Danske Invest and BankInvest Optima

Assuming the 90 days trading horizon Danske Invest is expected to generate 2.81 times less return on investment than BankInvest Optima. But when comparing it to its historical volatility, Danske Invest Euro is 2.64 times less risky than BankInvest Optima. It trades about 0.09 of its potential returns per unit of risk. BankInvest Optima 30 is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  10,795  in BankInvest Optima 30 on September 23, 2024 and sell it today you would earn a total of  310.00  from holding BankInvest Optima 30 or generate 2.87% return on investment over 90 days.

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

Danske Invest Euro  vs.  BankInvest Optima 30

Danske Invest Euro

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Danske Invest Euro are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical and fundamental indicators, Danske Invest is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

BankInvest Optima

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BankInvest Optima 30 are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, BankInvest Optima is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Danske Invest and BankInvest Optima

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

The idea behind Danske Invest Euro and BankInvest Optima 30 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.