Correlation Between Vestjysk Bank and Groenlandsbanken

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

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

Diversification Opportunities for Vestjysk Bank and Groenlandsbanken

0.6

Correlation Coefficient

Vestjysk Bank  Groenlandsbanken

Poor diversification

The 3 months correlation between Vestjysk and Groenlandsbanken is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Vestjysk Bank AS and Groenlandsbanken AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Groenlandsbanken and Vestjysk 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 Vestjysk Bank AS are associated (or correlated) with Groenlandsbanken. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Groenlandsbanken has no effect on the direction of Vestjysk Bank i.e., Vestjysk Bank and Groenlandsbanken go up and down completely randomly.

Pair Corralation between Vestjysk Bank and Groenlandsbanken

Assuming the 90 days trading horizon Vestjysk Bank is expected to generate 3.04 times less return on investment than Groenlandsbanken. But when comparing it to its historical volatility, Vestjysk Bank AS is 1.27 times less risky than Groenlandsbanken. It trades about 0.1 of its potential returns per unit of risk. Groenlandsbanken AS is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  67,000  in Groenlandsbanken AS on October 23, 2024 and sell it today you would earn a total of  13,000  from holding Groenlandsbanken AS or generate 19.4% return on investment over 90 days.

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

Vestjysk Bank AS  vs.  Groenlandsbanken AS

Vestjysk Bank AS

Risk-Adjusted Performance

8 of 100

OK

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

Groenlandsbanken

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Groenlandsbanken AS are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Groenlandsbanken displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Vestjysk Bank and Groenlandsbanken

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

The idea behind Vestjysk Bank AS and Groenlandsbanken 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.