Correlation Between LUXOR-B and Skjern Bank

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

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

Diversification Opportunities for LUXOR-B and Skjern Bank

0.32

Correlation Coefficient

LUXOR-B  Skjern Bank

Weak diversification

The 3 months correlation between LUXOR-B and Skjern is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Investeringsselskabet Luxor AS and Skjern Bank AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Skjern Bank AS and LUXOR-B 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 Investeringsselskabet Luxor AS are associated (or correlated) with Skjern Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Skjern Bank AS has no effect on the direction of LUXOR-B i.e., LUXOR-B and Skjern Bank go up and down completely randomly.

Pair Corralation between LUXOR-B and Skjern Bank

Assuming the 90 days trading horizon Investeringsselskabet Luxor AS is expected to under-perform the Skjern Bank. In addition to that, LUXOR-B is 1.28 times more volatile than Skjern Bank AS. It trades about 0.0 of its total potential returns per unit of risk. Skjern Bank AS is currently generating about 0.23 per unit of volatility. If you would invest  15,300  in Skjern Bank AS on December 1, 2024 and sell it today you would earn a total of  5,600  from holding Skjern Bank AS or generate 36.6% return on investment over 90 days.

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

Investeringsselskabet Luxor AS  vs.  Skjern Bank AS

Investeringsselskabet

Risk-Adjusted Performance

Very Weak

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

Skjern Bank AS

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Skjern Bank AS are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Skjern Bank displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with LUXOR-B and Skjern Bank

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

The idea behind Investeringsselskabet Luxor AS and Skjern Bank 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.