Correlation Between Skjern Bank and Ringkjoebing Landbobank

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

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

Diversification Opportunities for Skjern Bank and Ringkjoebing Landbobank

0.47

Correlation Coefficient

Skjern Bank  Ringkjoebing Landbobank

Very weak diversification

The 3 months correlation between Skjern and Ringkjoebing is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Skjern Bank AS and Ringkjoebing Landbobank AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ringkjoebing Landbobank and Skjern 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 Skjern Bank AS are associated (or correlated) with Ringkjoebing Landbobank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ringkjoebing Landbobank has no effect on the direction of Skjern Bank i.e., Skjern Bank and Ringkjoebing Landbobank go up and down completely randomly.

Pair Corralation between Skjern Bank and Ringkjoebing Landbobank

Assuming the 90 days trading horizon Skjern Bank AS is expected to generate 1.53 times more return on investment than Ringkjoebing Landbobank. However, Skjern Bank is 1.53 times more volatile than Ringkjoebing Landbobank AS. It trades about 0.06 of its potential returns per unit of risk. Ringkjoebing Landbobank AS is currently generating about 0.04 per unit of risk. If you would invest  19,400  in Skjern Bank AS on October 7, 2024 and sell it today you would earn a total of  2,400  from holding Skjern Bank AS or generate 12.37% return on investment over 90 days.

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

Skjern Bank AS  vs.  Ringkjoebing Landbobank AS

Skjern Bank AS

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Skjern Bank AS are ranked lower than 15 (%) 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.

Ringkjoebing Landbobank

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Ringkjoebing Landbobank AS are ranked lower than 16 (%) 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.

Pair Trading with Skjern Bank and Ringkjoebing Landbobank

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

The idea behind Skjern Bank AS and Ringkjoebing Landbobank 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.