Correlation Between Kreditbanken and Lollands Bank

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

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

Diversification Opportunities for Kreditbanken and Lollands Bank

0.17

Correlation Coefficient

Kreditbanken  Lollands Bank

Average diversification

The 3 months correlation between Kreditbanken and Lollands is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Kreditbanken AS and Lollands Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lollands Bank and Kreditbanken 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 Kreditbanken AS are associated (or correlated) with Lollands Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lollands Bank has no effect on the direction of Kreditbanken i.e., Kreditbanken and Lollands Bank go up and down completely randomly.

Pair Corralation between Kreditbanken and Lollands Bank

Assuming the 90 days trading horizon Kreditbanken AS is expected to generate 0.76 times more return on investment than Lollands Bank. However, Kreditbanken AS is 1.31 times less risky than Lollands Bank. It trades about 0.02 of its potential returns per unit of risk. Lollands Bank is currently generating about -0.05 per unit of risk. If you would invest  500,000  in Kreditbanken AS on August 31, 2024 and sell it today you would earn a total of  5,000  from holding Kreditbanken AS or generate 1.0% return on investment over 90 days.

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

Kreditbanken AS  vs.  Lollands Bank

Kreditbanken AS

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Kreditbanken AS are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical and fundamental indicators, Kreditbanken is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Lollands Bank

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Kreditbanken and Lollands Bank

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

The idea behind Kreditbanken AS and Lollands Bank 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.