Correlation Between UmweltBank and Sydbank A/S

Can any of the company-specific risk be diversified away by investing in both UmweltBank and Sydbank A/S 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 UmweltBank and Sydbank A/S into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between UmweltBank AG and Sydbank AS, you can compare the effects of market volatilities on UmweltBank and Sydbank A/S 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 UmweltBank with a short position of Sydbank A/S. Check out your portfolio center. Please also check ongoing floating volatility patterns of UmweltBank and Sydbank A/S.

Diversification Opportunities for UmweltBank and Sydbank A/S

0.65

Correlation Coefficient

UmweltBank  Sydbank A/S

Poor diversification

The 3 months correlation between UmweltBank and Sydbank is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding UmweltBank AG and Sydbank AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sydbank A/S and UmweltBank 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 UmweltBank AG are associated (or correlated) with Sydbank A/S. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sydbank A/S has no effect on the direction of UmweltBank i.e., UmweltBank and Sydbank A/S go up and down completely randomly.

Pair Corralation between UmweltBank and Sydbank A/S

Assuming the 90 days trading horizon UmweltBank AG is expected to under-perform the Sydbank A/S. But the stock apears to be less risky and, when comparing its historical volatility, UmweltBank AG is 2.52 times less risky than Sydbank A/S. The stock trades about -0.06 of its potential returns per unit of risk. The Sydbank AS is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  1,068  in Sydbank AS on October 11, 2024 and sell it today you would earn a total of  4,117  from holding Sydbank AS or generate 385.49% return on investment over 90 days.

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

UmweltBank AG  vs.  Sydbank AS

UmweltBank AG

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in UmweltBank AG are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, UmweltBank unveiled solid returns over the last few months and may actually be approaching a breakup point.

Sydbank A/S

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sydbank AS are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Sydbank A/S reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with UmweltBank and Sydbank A/S

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

The idea behind UmweltBank AG and Sydbank 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.