Correlation Between Danske Invest and Skjern Bank

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

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

Diversification Opportunities for Danske Invest and Skjern Bank

-0.34

Correlation Coefficient

Danske Invest  Skjern Bank

Very good diversification

The 3 months correlation between Danske and Skjern is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Danske Invest and Skjern Bank AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Skjern Bank AS 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 are associated (or correlated) with Skjern Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Skjern Bank AS has no effect on the direction of Danske Invest i.e., Danske Invest and Skjern Bank go up and down completely randomly.

Pair Corralation between Danske Invest and Skjern Bank

Assuming the 90 days trading horizon Danske Invest is expected to under-perform the Skjern Bank. But the stock apears to be less risky and, when comparing its historical volatility, Danske Invest is 5.96 times less risky than Skjern Bank. The stock trades about -0.11 of its potential returns per unit of risk. The Skjern Bank AS is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  15,300  in Skjern Bank AS on December 1, 2024 and sell it today you would earn a total of  5,600  from holding Skjern Bank AS or generate 36.6% return on investment over 90 days.

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

Danske Invest   vs.  Skjern Bank AS

Danske Invest

Risk-Adjusted Performance

Very Weak

Over the last 90 days Danske Invest has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, Danske Invest is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Skjern Bank AS

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Skjern Bank AS are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Skjern Bank displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Danske Invest and Skjern Bank

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

The idea behind Danske Invest and Skjern Bank 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.

Check out your portfolio center.

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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.