Correlation Between Slandsbanki and Hampidjan

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

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

Diversification Opportunities for Slandsbanki and Hampidjan

0.03

Correlation Coefficient

Slandsbanki  Hampidjan

Significant diversification

The 3 months correlation between Slandsbanki and Hampidjan is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding slandsbanki hf and Hampidjan hf in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hampidjan hf and Slandsbanki 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 slandsbanki hf are associated (or correlated) with Hampidjan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hampidjan hf has no effect on the direction of Slandsbanki i.e., Slandsbanki and Hampidjan go up and down completely randomly.

Pair Corralation between Slandsbanki and Hampidjan

Assuming the 90 days trading horizon slandsbanki hf is expected to generate 1.15 times more return on investment than Hampidjan. However, Slandsbanki is 1.15 times more volatile than Hampidjan hf. It trades about 0.24 of its potential returns per unit of risk. Hampidjan hf is currently generating about -0.03 per unit of risk. If you would invest  9,980  in slandsbanki hf on September 13, 2024 and sell it today you would earn a total of  2,245  from holding slandsbanki hf or generate 22.49% return on investment over 90 days.

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

slandsbanki hf  vs.  Hampidjan hf

slandsbanki hf

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in slandsbanki hf are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak fundamental drivers, Slandsbanki exhibited solid returns over the last few months and may actually be approaching a breakup point.

Hampidjan hf

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hampidjan hf has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, Hampidjan is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Slandsbanki and Hampidjan

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

The idea behind slandsbanki hf and Hampidjan hf 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.