Correlation Between Orsted AS and Sydbank AS

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

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

Diversification Opportunities for Orsted AS and Sydbank AS

-0.67

Correlation Coefficient

Orsted AS  Sydbank AS

Excellent diversification

The 3 months correlation between Orsted and Sydbank is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Orsted AS and Sydbank AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sydbank AS and Orsted AS 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 Orsted AS are associated (or correlated) with Sydbank AS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sydbank AS has no effect on the direction of Orsted AS i.e., Orsted AS and Sydbank AS go up and down completely randomly.

Pair Corralation between Orsted AS and Sydbank AS

Assuming the 90 days trading horizon Orsted AS is expected to generate 5.33 times less return on investment than Sydbank AS. In addition to that, Orsted AS is 2.04 times more volatile than Sydbank AS. It trades about 0.0 of its total potential returns per unit of risk. Sydbank AS is currently generating about 0.04 per unit of volatility. If you would invest  34,060  in Sydbank AS on September 3, 2024 and sell it today you would earn a total of  1,000.00  from holding Sydbank AS or generate 2.94% return on investment over 90 days.

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

Orsted AS  vs.  Sydbank AS

Orsted AS

Risk-Adjusted Performance

0 of 100

Very Weak

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

Sydbank AS

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Sydbank AS are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Sydbank AS is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Orsted AS and Sydbank AS

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

The idea behind Orsted AS and Sydbank 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.