Correlation Between Groenlandsbanken and Newcap Holding

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

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

Diversification Opportunities for Groenlandsbanken and Newcap Holding

-0.35

Correlation Coefficient

Groenlandsbanken  Newcap Holding

Very good diversification

The 3 months correlation between Groenlandsbanken and Newcap is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Groenlandsbanken AS and Newcap Holding AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Newcap Holding AS and Groenlandsbanken 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 Groenlandsbanken AS are associated (or correlated) with Newcap Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Newcap Holding AS has no effect on the direction of Groenlandsbanken i.e., Groenlandsbanken and Newcap Holding go up and down completely randomly.

Pair Corralation between Groenlandsbanken and Newcap Holding

Assuming the 90 days trading horizon Groenlandsbanken is expected to generate 12.19 times less return on investment than Newcap Holding. But when comparing it to its historical volatility, Groenlandsbanken AS is 25.72 times less risky than Newcap Holding. It trades about 0.11 of its potential returns per unit of risk. Newcap Holding AS is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  18.00  in Newcap Holding AS on September 13, 2024 and sell it today you would lose (8.00) from holding Newcap Holding AS or give up 44.44% of portfolio value over 90 days.

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

Groenlandsbanken AS  vs.  Newcap Holding AS

Groenlandsbanken

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Groenlandsbanken AS are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Groenlandsbanken may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Newcap Holding AS

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Newcap Holding AS are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating basic indicators, Newcap Holding sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Groenlandsbanken and Newcap Holding

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

The idea behind Groenlandsbanken AS and Newcap Holding 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.