Correlation Between Danske Invest and Sparinvest USA

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

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

Diversification Opportunities for Danske Invest and Sparinvest USA

0.89

Correlation Coefficient

Danske Invest  Sparinvest USA

Very poor diversification

The 3 months correlation between Danske and Sparinvest is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Danske Invest and Sparinvest USA Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sparinvest USA Small 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 Sparinvest USA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sparinvest USA Small has no effect on the direction of Danske Invest i.e., Danske Invest and Sparinvest USA go up and down completely randomly.

Pair Corralation between Danske Invest and Sparinvest USA

Assuming the 90 days trading horizon Danske Invest is expected to generate 10.76 times less return on investment than Sparinvest USA. But when comparing it to its historical volatility, Danske Invest is 20.67 times less risky than Sparinvest USA. It trades about 0.38 of its potential returns per unit of risk. Sparinvest USA Small is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  12,148  in Sparinvest USA Small on September 3, 2024 and sell it today you would earn a total of  2,187  from holding Sparinvest USA Small or generate 18.0% return on investment over 90 days.

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

Danske Invest   vs.  Sparinvest USA Small

Danske Invest

Risk-Adjusted Performance

29 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Danske Invest are ranked lower than 29 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Danske Invest is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Sparinvest USA Small

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sparinvest USA Small are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. Despite quite conflicting basic indicators, Sparinvest USA disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Danske Invest and Sparinvest USA

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

The idea behind Danske Invest and Sparinvest USA Small 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.