Correlation Between First and Sydbank

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

By analyzing existing cross correlation between First Class Metals and Sydbank, you can compare the effects of market volatilities on First and Sydbank 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 First with a short position of Sydbank. Check out your portfolio center. Please also check ongoing floating volatility patterns of First and Sydbank.

Diversification Opportunities for First and Sydbank

0.21

Correlation Coefficient

First  Sydbank

Modest diversification

The 3 months correlation between First and Sydbank is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding First Class Metals and Sydbank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sydbank and First 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 First Class Metals are associated (or correlated) with Sydbank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sydbank has no effect on the direction of First i.e., First and Sydbank go up and down completely randomly.

Pair Corralation between First and Sydbank

Assuming the 90 days trading horizon First Class Metals is expected to under-perform the Sydbank. In addition to that, First is 3.79 times more volatile than Sydbank. It trades about -0.02 of its total potential returns per unit of risk. Sydbank is currently generating about 0.03 per unit of volatility. If you would invest  36,440  in Sydbank on October 8, 2024 and sell it today you would earn a total of  2,440  from holding Sydbank or generate 6.7% return on investment over 90 days.

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

First Class Metals  vs.  Sydbank

First Class Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days First Class Metals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Sydbank

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sydbank are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Sydbank unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with First and Sydbank

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

The idea behind First Class Metals and Sydbank 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.