Correlation Between Fynske Bank and FLSmidth

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

By analyzing existing cross correlation between Fynske Bank AS and FLSmidth Co, you can compare the effects of market volatilities on Fynske Bank and FLSmidth 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 Fynske Bank with a short position of FLSmidth. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fynske Bank and FLSmidth.

Diversification Opportunities for Fynske Bank and FLSmidth

-0.21

Correlation Coefficient

Fynske Bank  FLSmidth

Very good diversification

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

Pair Corralation between Fynske Bank and FLSmidth

Assuming the 90 days trading horizon Fynske Bank AS is expected to generate 1.33 times more return on investment than FLSmidth. However, Fynske Bank is 1.33 times more volatile than FLSmidth Co. It trades about 0.1 of its potential returns per unit of risk. FLSmidth Co is currently generating about -0.01 per unit of risk. If you would invest  14,100  in Fynske Bank AS on December 1, 2024 and sell it today you would earn a total of  1,700  from holding Fynske Bank AS or generate 12.06% return on investment over 90 days.

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

Fynske Bank AS  vs.  FLSmidth Co

Fynske Bank AS

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fynske Bank AS are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating fundamental indicators, Fynske Bank exhibited solid returns over the last few months and may actually be approaching a breakup point.

FLSmidth

Risk-Adjusted Performance

Very Weak

Over the last 90 days FLSmidth Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, FLSmidth is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Fynske Bank and FLSmidth

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

The idea behind Fynske Bank AS and FLSmidth Co 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.