Correlation Between DKIDKF and Sparinvest INDEX

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

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

Diversification Opportunities for DKIDKF and Sparinvest INDEX

-0.67

Correlation Coefficient

DKIDKF  Sparinvest INDEX

Excellent diversification

The 3 months correlation between DKIDKF and Sparinvest is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Investeringsforeningen Danske and Sparinvest INDEX Globale in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sparinvest INDEX Globale and DKIDKF 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 Investeringsforeningen Danske Invest are associated (or correlated) with Sparinvest INDEX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sparinvest INDEX Globale has no effect on the direction of DKIDKF i.e., DKIDKF and Sparinvest INDEX go up and down completely randomly.

Pair Corralation between DKIDKF and Sparinvest INDEX

Assuming the 90 days trading horizon Investeringsforeningen Danske Invest is expected to under-perform the Sparinvest INDEX. In addition to that, DKIDKF is 1.25 times more volatile than Sparinvest INDEX Globale. It trades about -0.05 of its total potential returns per unit of risk. Sparinvest INDEX Globale is currently generating about 0.19 per unit of volatility. If you would invest  14,354  in Sparinvest INDEX Globale on September 5, 2024 and sell it today you would earn a total of  1,076  from holding Sparinvest INDEX Globale or generate 7.5% return on investment over 90 days.

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

Investeringsforeningen Danske   vs.  Sparinvest INDEX Globale

Investeringsforeningen

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Investeringsforeningen Danske Invest has generated negative risk-adjusted returns adding no value to fund investors. Despite somewhat strong forward indicators, DKIDKF is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Sparinvest INDEX Globale

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sparinvest INDEX Globale are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of very weak basic indicators, Sparinvest INDEX may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with DKIDKF and Sparinvest INDEX

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

The idea behind Investeringsforeningen Danske Invest and Sparinvest INDEX Globale 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.