Correlation Between Maj Invest and Danske Invest

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

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

Diversification Opportunities for Maj Invest and Danske Invest

0.62

Correlation Coefficient

Maj Invest  Danske Invest

Poor diversification

The 3 months correlation between Maj and Danske is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Maj Invest and Danske Invest Danmark in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Danske Invest Danmark and Maj Invest 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 Maj Invest are associated (or correlated) with Danske Invest. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Danske Invest Danmark has no effect on the direction of Maj Invest i.e., Maj Invest and Danske Invest go up and down completely randomly.

Pair Corralation between Maj Invest and Danske Invest

Assuming the 90 days trading horizon Maj Invest is expected to generate 0.3 times more return on investment than Danske Invest. However, Maj Invest is 3.36 times less risky than Danske Invest. It trades about -0.08 of its potential returns per unit of risk. Danske Invest Danmark is currently generating about -0.09 per unit of risk. If you would invest  10,057  in Maj Invest on December 30, 2024 and sell it today you would lose (203.00) from holding Maj Invest or give up 2.02% of portfolio value over 90 days.

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

Maj Invest   vs.  Danske Invest Danmark

Maj Invest

Risk-Adjusted Performance

Very Weak

Over the last 90 days Maj Invest has generated negative risk-adjusted returns adding no value to fund investors. Despite somewhat strong forward-looking indicators, Maj Invest is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Danske Invest Danmark

Risk-Adjusted Performance

Very Weak

Over the last 90 days Danske Invest Danmark has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Maj Invest and Danske Invest

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

The idea behind Maj Invest and Danske Invest Danmark 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.