Correlation Between Prime Office and Vestjysk Bank

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

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

Diversification Opportunities for Prime Office and Vestjysk Bank

0.73

Correlation Coefficient

Prime Office  Vestjysk Bank

Poor diversification

The 3 months correlation between Prime and Vestjysk is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Prime Office 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 Prime Office 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 Prime Office 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 Prime Office i.e., Prime Office and Vestjysk Bank go up and down completely randomly.

Pair Corralation between Prime Office and Vestjysk Bank

Assuming the 90 days trading horizon Prime Office AS is expected to generate 1.6 times more return on investment than Vestjysk Bank. However, Prime Office is 1.6 times more volatile than Vestjysk Bank AS. It trades about -0.02 of its potential returns per unit of risk. Vestjysk Bank AS is currently generating about -0.09 per unit of risk. If you would invest  18,600  in Prime Office AS on September 1, 2024 and sell it today you would lose (1,000.00) from holding Prime Office AS or give up 5.38% of portfolio value over 90 days.

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

Prime Office AS  vs.  Vestjysk Bank AS

Prime Office AS

Risk-Adjusted Performance

0 of 100

Very Weak

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

Vestjysk Bank AS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vestjysk Bank AS has generated negative risk-adjusted returns adding no value to investors with long positions. 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 Prime Office and Vestjysk Bank

The main advantage of trading using opposite Prime Office and Vestjysk Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Prime Office 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 Prime Office 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.