Correlation Between Groenlandsbanken and Strategic Investments

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

By analyzing existing cross correlation between Groenlandsbanken AS and Strategic Investments AS, you can compare the effects of market volatilities on Groenlandsbanken and Strategic Investments 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 Strategic Investments. Check out your portfolio center. Please also check ongoing floating volatility patterns of Groenlandsbanken and Strategic Investments.

Diversification Opportunities for Groenlandsbanken and Strategic Investments

-0.6

Correlation Coefficient

Groenlandsbanken  Strategic Investments

Excellent diversification

The 3 months correlation between Groenlandsbanken and Strategic is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Groenlandsbanken AS and Strategic Investments AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Strategic Investments 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 Strategic Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Strategic Investments has no effect on the direction of Groenlandsbanken i.e., Groenlandsbanken and Strategic Investments go up and down completely randomly.

Pair Corralation between Groenlandsbanken and Strategic Investments

Assuming the 90 days trading horizon Groenlandsbanken AS is expected to generate 0.29 times more return on investment than Strategic Investments. However, Groenlandsbanken AS is 3.4 times less risky than Strategic Investments. It trades about 0.09 of its potential returns per unit of risk. Strategic Investments AS is currently generating about 0.0 per unit of risk. If you would invest  66,500  in Groenlandsbanken AS on September 3, 2024 and sell it today you would earn a total of  3,500  from holding Groenlandsbanken AS or generate 5.26% return on investment over 90 days.

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

Groenlandsbanken AS  vs.  Strategic Investments AS

Groenlandsbanken

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Groenlandsbanken AS are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Groenlandsbanken is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Strategic Investments

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Strategic Investments AS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Strategic Investments is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Groenlandsbanken and Strategic Investments

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

The idea behind Groenlandsbanken AS and Strategic Investments AS 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.