Correlation Between Danske Bank and BOC Hong

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

Diversification Opportunities for Danske Bank and BOC Hong

0.92

Correlation Coefficient

Danske Bank  BOC Hong

Almost no diversification

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

Pair Corralation between Danske Bank and BOC Hong

Assuming the 90 days horizon Danske Bank AS is expected to generate 0.97 times more return on investment than BOC Hong. However, Danske Bank AS is 1.03 times less risky than BOC Hong. It trades about 0.26 of its potential returns per unit of risk. BOC Hong Kong is currently generating about 0.22 per unit of risk. If you would invest  1,351  in Danske Bank AS on December 28, 2024 and sell it today you would earn a total of  389.00  from holding Danske Bank AS or generate 28.79% return on investment over 90 days.

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

Danske Bank AS  vs.  BOC Hong Kong

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 20 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak technical and fundamental indicators, Danske Bank showed solid returns over the last few months and may actually be approaching a breakup point.

BOC Hong Kong

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in BOC Hong Kong are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak essential indicators, BOC Hong showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Danske Bank and BOC Hong

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

The idea behind Danske Bank AS and BOC Hong Kong 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.