Correlation Between Strategic Investments and Danske Bank

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

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

Diversification Opportunities for Strategic Investments and Danske Bank

-0.68

Correlation Coefficient

Strategic Investments  Danske Bank

Excellent diversification

The 3 months correlation between Strategic and Danske is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Strategic Investments AS and Danske Bank AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Danske Bank AS and Strategic Investments 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 Strategic Investments AS are associated (or correlated) with Danske Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Danske Bank AS has no effect on the direction of Strategic Investments i.e., Strategic Investments and Danske Bank go up and down completely randomly.

Pair Corralation between Strategic Investments and Danske Bank

Assuming the 90 days trading horizon Strategic Investments AS is expected to under-perform the Danske Bank. In addition to that, Strategic Investments is 2.88 times more volatile than Danske Bank AS. It trades about -0.01 of its total potential returns per unit of risk. Danske Bank AS is currently generating about 0.11 per unit of volatility. If you would invest  19,141  in Danske Bank AS on October 10, 2024 and sell it today you would earn a total of  1,559  from holding Danske Bank AS or generate 8.14% return on investment over 90 days.

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

Strategic Investments AS  vs.  Danske Bank AS

Strategic Investments

Risk-Adjusted Performance

0 of 100

Very Weak

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

Danske Bank AS

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Danske Bank AS are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating basic indicators, Danske Bank may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Strategic Investments and Danske Bank

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

The idea behind Strategic Investments AS and Danske 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.