Correlation Between Vestas Wind and Danske Invest

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

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

Diversification Opportunities for Vestas Wind and Danske Invest

-0.57

Correlation Coefficient

Vestas Wind  Danske Invest

Excellent diversification

The 3 months correlation between Vestas and Danske is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Vestas Wind Systems and Danske Invest in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Danske Invest and Vestas Wind 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 Vestas Wind Systems are associated (or correlated) with Danske Invest. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Danske Invest has no effect on the direction of Vestas Wind i.e., Vestas Wind and Danske Invest go up and down completely randomly.

Pair Corralation between Vestas Wind and Danske Invest

Assuming the 90 days trading horizon Vestas Wind Systems is expected to generate 7.32 times more return on investment than Danske Invest. However, Vestas Wind is 7.32 times more volatile than Danske Invest . It trades about 0.03 of its potential returns per unit of risk. Danske Invest is currently generating about -0.1 per unit of risk. If you would invest  9,808  in Vestas Wind Systems on December 30, 2024 and sell it today you would earn a total of  202.00  from holding Vestas Wind Systems or generate 2.06% return on investment over 90 days.

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

Vestas Wind Systems  vs.  Danske Invest

Vestas Wind Systems

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Vestas Wind Systems are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Vestas Wind is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Danske Invest

Risk-Adjusted Performance

Very Weak

Over the last 90 days Danske Invest has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, Danske Invest is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Vestas Wind and Danske Invest

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

The idea behind Vestas Wind Systems and Danske Invest 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 Global Correlations module to find global opportunities by holding instruments from different markets.