Correlation Between Danske Bank and Orphazyme

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

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

Diversification Opportunities for Danske Bank and Orphazyme

-0.69

Correlation Coefficient

Danske Bank  Orphazyme

Excellent diversification

The 3 months correlation between Danske and Orphazyme is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Danske Bank AS and Orphazyme AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Orphazyme AS and Danske 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 Danske Bank AS are associated (or correlated) with Orphazyme. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Orphazyme AS has no effect on the direction of Danske Bank i.e., Danske Bank and Orphazyme go up and down completely randomly.

Pair Corralation between Danske Bank and Orphazyme

Assuming the 90 days trading horizon Danske Bank is expected to generate 7.08 times less return on investment than Orphazyme. But when comparing it to its historical volatility, Danske Bank AS is 4.04 times less risky than Orphazyme. It trades about 0.04 of its potential returns per unit of risk. Orphazyme AS is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  82,420  in Orphazyme AS on September 12, 2024 and sell it today you would earn a total of  12,580  from holding Orphazyme AS or generate 15.26% return on investment over 90 days.

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

Danske Bank AS  vs.  Orphazyme AS

Danske Bank AS

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Danske Bank AS are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Danske Bank is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Orphazyme AS

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Orphazyme AS are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating fundamental indicators, Orphazyme exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Danske Bank and Orphazyme

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

The idea behind Danske Bank AS and Orphazyme 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.