Correlation Between Laan Spar and Ringkjoebing Landbobank

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

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

Diversification Opportunities for Laan Spar and Ringkjoebing Landbobank

0.26

Correlation Coefficient

Laan Spar  Ringkjoebing Landbobank

Modest diversification

The 3 months correlation between Laan and Ringkjoebing is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Laan Spar Bank and Ringkjoebing Landbobank AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ringkjoebing Landbobank and Laan Spar 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 Laan Spar Bank are associated (or correlated) with Ringkjoebing Landbobank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ringkjoebing Landbobank has no effect on the direction of Laan Spar i.e., Laan Spar and Ringkjoebing Landbobank go up and down completely randomly.

Pair Corralation between Laan Spar and Ringkjoebing Landbobank

Assuming the 90 days trading horizon Laan Spar is expected to generate 9.15 times less return on investment than Ringkjoebing Landbobank. In addition to that, Laan Spar is 1.24 times more volatile than Ringkjoebing Landbobank AS. It trades about 0.01 of its total potential returns per unit of risk. Ringkjoebing Landbobank AS is currently generating about 0.08 per unit of volatility. If you would invest  109,000  in Ringkjoebing Landbobank AS on September 3, 2024 and sell it today you would earn a total of  6,000  from holding Ringkjoebing Landbobank AS or generate 5.5% return on investment over 90 days.

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

Laan Spar Bank  vs.  Ringkjoebing Landbobank AS

Laan Spar Bank

Risk-Adjusted Performance

0 of 100

Very Weak

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

Ringkjoebing Landbobank

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Ringkjoebing Landbobank AS are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Ringkjoebing Landbobank is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Laan Spar and Ringkjoebing Landbobank

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

The idea behind Laan Spar Bank and Ringkjoebing Landbobank 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.