Correlation Between TRAVEL + and DNB BANK

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

By analyzing existing cross correlation between TRAVEL LEISURE DL 01 and DNB BANK ASA, you can compare the effects of market volatilities on TRAVEL + and DNB 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 TRAVEL + with a short position of DNB BANK. Check out your portfolio center. Please also check ongoing floating volatility patterns of TRAVEL + and DNB BANK.

Diversification Opportunities for TRAVEL + and DNB BANK

0.68

Correlation Coefficient

TRAVEL +  DNB BANK

Poor diversification

The 3 months correlation between TRAVEL and DNB is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding TRAVEL LEISURE DL 01 and DNB BANK ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DNB BANK ASA and TRAVEL + 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 TRAVEL LEISURE DL 01 are associated (or correlated) with DNB BANK. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DNB BANK ASA has no effect on the direction of TRAVEL + i.e., TRAVEL + and DNB BANK go up and down completely randomly.

Pair Corralation between TRAVEL + and DNB BANK

Assuming the 90 days trading horizon TRAVEL LEISURE DL 01 is expected to generate 0.77 times more return on investment than DNB BANK. However, TRAVEL LEISURE DL 01 is 1.31 times less risky than DNB BANK. It trades about 0.23 of its potential returns per unit of risk. DNB BANK ASA is currently generating about 0.03 per unit of risk. If you would invest  4,119  in TRAVEL LEISURE DL 01 on October 22, 2024 and sell it today you would earn a total of  931.00  from holding TRAVEL LEISURE DL 01 or generate 22.6% return on investment over 90 days.

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

TRAVEL LEISURE DL 01  vs.  DNB BANK ASA

TRAVEL LEISURE DL

Risk-Adjusted Performance

17 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in TRAVEL LEISURE DL 01 are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, TRAVEL + reported solid returns over the last few months and may actually be approaching a breakup point.

DNB BANK ASA

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in DNB BANK ASA are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, DNB BANK is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with TRAVEL + and DNB BANK

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

The idea behind TRAVEL LEISURE DL 01 and DNB BANK ASA 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..