Correlation Between Moens Bank and Skjern Bank

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

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

Diversification Opportunities for Moens Bank and Skjern Bank

0.75

Correlation Coefficient

Moens Bank  Skjern Bank

Poor diversification

The 3 months correlation between Moens and Skjern is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Moens Bank 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 Moens Bank 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 Moens Bank 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 Moens Bank i.e., Moens Bank and Skjern Bank go up and down completely randomly.

Pair Corralation between Moens Bank and Skjern Bank

Assuming the 90 days trading horizon Moens Bank is expected to generate 1.66 times less return on investment than Skjern Bank. In addition to that, Moens Bank is 1.1 times more volatile than Skjern Bank AS. It trades about 0.16 of its total potential returns per unit of risk. Skjern Bank AS is currently generating about 0.29 per unit of volatility. If you would invest  19,500  in Skjern Bank AS on December 2, 2024 and sell it today you would earn a total of  1,400  from holding Skjern Bank AS or generate 7.18% return on investment over 90 days.

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

Moens Bank AS  vs.  Skjern Bank AS

Moens Bank AS

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Moens Bank AS are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Moens Bank displayed solid returns over the last few months and may actually be approaching a breakup point.

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 Moens Bank and Skjern Bank

The main advantage of trading using opposite Moens Bank and Skjern Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Moens Bank 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 Moens Bank 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.