Correlation Between Strategic Investments and Nordfyns Bank

Can any of the company-specific risk be diversified away by investing in both Strategic Investments 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 Strategic Investments and Nordfyns 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 Nordfyns Bank AS, you can compare the effects of market volatilities on Strategic Investments 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 Strategic Investments with a short position of Nordfyns Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Strategic Investments and Nordfyns Bank.

Diversification Opportunities for Strategic Investments and Nordfyns Bank

0.39

Correlation Coefficient

Strategic Investments  Nordfyns Bank

Weak diversification

The 3 months correlation between Strategic and Nordfyns is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Strategic Investments AS 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 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 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 Strategic Investments i.e., Strategic Investments and Nordfyns Bank go up and down completely randomly.

Pair Corralation between Strategic Investments and Nordfyns Bank

Assuming the 90 days trading horizon Strategic Investments AS is expected to generate 2.02 times more return on investment than Nordfyns Bank. However, Strategic Investments is 2.02 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 -0.13 per unit of risk. If you would invest  107.00  in Strategic Investments AS on October 26, 2024 and sell it today you would lose (1.00) from holding Strategic Investments AS or give up 0.93% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	94.74%
Values	Daily Returns

Strategic Investments AS  vs.  Nordfyns Bank AS

Strategic Investments

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Strategic Investments AS are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

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 Strategic Investments and Nordfyns Bank

The main advantage of trading using opposite Strategic Investments and Nordfyns Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Strategic Investments 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 Strategic Investments AS 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.