Correlation Between Scandinavian Medical and Nordfyns Bank

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

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

Diversification Opportunities for Scandinavian Medical and Nordfyns Bank

0.11

Correlation Coefficient

Scandinavian Medical  Nordfyns Bank

Average diversification

The 3 months correlation between Scandinavian and Nordfyns is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Scandinavian Medical Solutions and Nordfyns Bank AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nordfyns Bank AS and Scandinavian Medical 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 Scandinavian Medical Solutions are associated (or correlated) with Nordfyns Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nordfyns Bank AS has no effect on the direction of Scandinavian Medical i.e., Scandinavian Medical and Nordfyns Bank go up and down completely randomly.

Pair Corralation between Scandinavian Medical and Nordfyns Bank

Assuming the 90 days trading horizon Scandinavian Medical Solutions is expected to generate 2.96 times more return on investment than Nordfyns Bank. However, Scandinavian Medical is 2.96 times more volatile than Nordfyns Bank AS. It trades about -0.02 of its potential returns per unit of risk. Nordfyns Bank AS is currently generating about -0.07 per unit of risk. If you would invest  648.00  in Scandinavian Medical Solutions on September 14, 2024 and sell it today you would lose (32.00) from holding Scandinavian Medical Solutions or give up 4.94% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

Scandinavian Medical Solutions  vs.  Nordfyns Bank AS

Scandinavian Medical

Risk-Adjusted Performance

0 of 100

Very Weak

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

Nordfyns Bank AS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nordfyns Bank AS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Nordfyns 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 Scandinavian Medical and Nordfyns Bank

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

The idea behind Scandinavian Medical Solutions and Nordfyns 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.