Correlation Between North Media and Vestjysk Bank

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

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

Diversification Opportunities for North Media and Vestjysk Bank

0.14

Correlation Coefficient

North Media  Vestjysk Bank

Average diversification

The 3 months correlation between North and Vestjysk is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding North Media AS and Vestjysk Bank AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vestjysk Bank AS and North Media 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 North Media AS are associated (or correlated) with Vestjysk Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vestjysk Bank AS has no effect on the direction of North Media i.e., North Media and Vestjysk Bank go up and down completely randomly.

Pair Corralation between North Media and Vestjysk Bank

Assuming the 90 days trading horizon North Media AS is expected to under-perform the Vestjysk Bank. In addition to that, North Media is 1.72 times more volatile than Vestjysk Bank AS. It trades about -0.18 of its total potential returns per unit of risk. Vestjysk Bank AS is currently generating about 0.06 per unit of volatility. If you would invest  428.00  in Vestjysk Bank AS on December 25, 2024 and sell it today you would earn a total of  18.00  from holding Vestjysk Bank AS or generate 4.21% return on investment over 90 days.

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

North Media AS  vs.  Vestjysk Bank AS

North Media AS

Risk-Adjusted Performance

Very Weak

Over the last 90 days North Media AS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Vestjysk Bank AS

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Vestjysk Bank AS are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Vestjysk 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 North Media and Vestjysk Bank

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

The idea behind North Media AS and Vestjysk 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.