Correlation Between Djurslands Bank and First Farms

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

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

Diversification Opportunities for Djurslands Bank and First Farms

0.13

Correlation Coefficient

Djurslands Bank  First Farms

Average diversification

The 3 months correlation between Djurslands and First is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Djurslands Bank and First Farms AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Farms AS and Djurslands 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 Djurslands Bank are associated (or correlated) with First Farms. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Farms AS has no effect on the direction of Djurslands Bank i.e., Djurslands Bank and First Farms go up and down completely randomly.

Pair Corralation between Djurslands Bank and First Farms

Assuming the 90 days trading horizon Djurslands Bank is expected to generate 0.61 times more return on investment than First Farms. However, Djurslands Bank is 1.65 times less risky than First Farms. It trades about 0.02 of its potential returns per unit of risk. First Farms AS is currently generating about -0.04 per unit of risk. If you would invest  51,500  in Djurslands Bank on September 4, 2024 and sell it today you would earn a total of  500.00  from holding Djurslands Bank or generate 0.97% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

Djurslands Bank  vs.  First Farms AS

Djurslands Bank

Risk-Adjusted Performance

1 of 100

Weak

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

First Farms AS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days First Farms AS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, First Farms is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Djurslands Bank and First Farms

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

The idea behind Djurslands Bank and First Farms 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.