Correlation Between Arion Banki and Slandsbanki

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

By analyzing existing cross correlation between Arion banki hf and slandsbanki hf, you can compare the effects of market volatilities on Arion Banki and Slandsbanki 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 Arion Banki with a short position of Slandsbanki. Check out your portfolio center. Please also check ongoing floating volatility patterns of Arion Banki and Slandsbanki.

Diversification Opportunities for Arion Banki and Slandsbanki

0.84

Correlation Coefficient

Arion Banki  Slandsbanki

Very poor diversification

The 3 months correlation between Arion and Slandsbanki is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Arion banki hf and slandsbanki hf in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on slandsbanki hf and Arion Banki 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 Arion banki hf are associated (or correlated) with Slandsbanki. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of slandsbanki hf has no effect on the direction of Arion Banki i.e., Arion Banki and Slandsbanki go up and down completely randomly.

Pair Corralation between Arion Banki and Slandsbanki

Assuming the 90 days trading horizon Arion Banki is expected to generate 1.77 times less return on investment than Slandsbanki. But when comparing it to its historical volatility, Arion banki hf is 1.16 times less risky than Slandsbanki. It trades about 0.16 of its potential returns per unit of risk. slandsbanki hf is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  10,200  in slandsbanki hf on August 30, 2024 and sell it today you would earn a total of  2,400  from holding slandsbanki hf or generate 23.53% return on investment over 90 days.

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

Arion banki hf  vs.  slandsbanki hf

Arion banki hf

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Arion banki hf are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak forward indicators, Arion Banki may actually be approaching a critical reversion point that can send shares even higher in December 2024.

slandsbanki hf

Risk-Adjusted Performance

19 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in slandsbanki hf are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak fundamental drivers, Slandsbanki exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Arion Banki and Slandsbanki

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

The idea behind Arion banki hf and slandsbanki hf 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.

Check out your portfolio center.

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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.