Correlation Between Ringkjoebing Landbobank and Nykredit Invest

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

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

Diversification Opportunities for Ringkjoebing Landbobank and Nykredit Invest

0.78

Correlation Coefficient

Ringkjoebing Landbobank  Nykredit Invest

Poor diversification

The 3 months correlation between Ringkjoebing and Nykredit is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Ringkjoebing Landbobank AS and Nykredit Invest Korte in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nykredit Invest Korte and Ringkjoebing Landbobank 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 Ringkjoebing Landbobank AS are associated (or correlated) with Nykredit Invest. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nykredit Invest Korte has no effect on the direction of Ringkjoebing Landbobank i.e., Ringkjoebing Landbobank and Nykredit Invest go up and down completely randomly.

Pair Corralation between Ringkjoebing Landbobank and Nykredit Invest

Assuming the 90 days trading horizon Ringkjoebing Landbobank AS is expected to generate 16.61 times more return on investment than Nykredit Invest. However, Ringkjoebing Landbobank is 16.61 times more volatile than Nykredit Invest Korte. It trades about 0.19 of its potential returns per unit of risk. Nykredit Invest Korte is currently generating about 0.19 per unit of risk. If you would invest  104,700  in Ringkjoebing Landbobank AS on September 16, 2024 and sell it today you would earn a total of  16,100  from holding Ringkjoebing Landbobank AS or generate 15.38% return on investment over 90 days.

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

Ringkjoebing Landbobank AS  vs.  Nykredit Invest Korte

Ringkjoebing Landbobank

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ringkjoebing Landbobank AS are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating fundamental indicators, Ringkjoebing Landbobank exhibited solid returns over the last few months and may actually be approaching a breakup point.

Nykredit Invest Korte

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Nykredit Invest Korte are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Nykredit Invest is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Ringkjoebing Landbobank and Nykredit Invest

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

The idea behind Ringkjoebing Landbobank AS and Nykredit Invest Korte 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.