Correlation Between Groenlandsbanken and BankIn Bredygt

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

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

Diversification Opportunities for Groenlandsbanken and BankIn Bredygt

0.49

Correlation Coefficient

Groenlandsbanken  BankIn Bredygt

Very weak diversification

The 3 months correlation between Groenlandsbanken and BankIn is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Groenlandsbanken AS and BankIn Bredygt Klimaakt in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BankIn Bredygt Klimaakt and Groenlandsbanken 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 Groenlandsbanken AS are associated (or correlated) with BankIn Bredygt. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BankIn Bredygt Klimaakt has no effect on the direction of Groenlandsbanken i.e., Groenlandsbanken and BankIn Bredygt go up and down completely randomly.

Pair Corralation between Groenlandsbanken and BankIn Bredygt

Assuming the 90 days trading horizon Groenlandsbanken AS is expected to generate 1.11 times more return on investment than BankIn Bredygt. However, Groenlandsbanken is 1.11 times more volatile than BankIn Bredygt Klimaakt. It trades about 0.15 of its potential returns per unit of risk. BankIn Bredygt Klimaakt is currently generating about -0.01 per unit of risk. If you would invest  68,000  in Groenlandsbanken AS on September 13, 2024 and sell it today you would earn a total of  2,500  from holding Groenlandsbanken AS or generate 3.68% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	72.73%
Values	Daily Returns

Groenlandsbanken AS  vs.  BankIn Bredygt Klimaakt

Groenlandsbanken

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Groenlandsbanken AS are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Groenlandsbanken may actually be approaching a critical reversion point that can send shares even higher in January 2025.

BankIn Bredygt Klimaakt

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BankIn Bredygt Klimaakt are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating forward indicators, BankIn Bredygt may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Groenlandsbanken and BankIn Bredygt

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

The idea behind Groenlandsbanken AS and BankIn Bredygt Klimaakt 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.