Correlation Between ISS AS and Danske Bank

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

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

Diversification Opportunities for ISS AS and Danske Bank

-0.33

Correlation Coefficient

ISS AS  Danske Bank

Very good diversification

The 3 months correlation between ISS and Danske is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding ISS AS and Danske Bank AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Danske Bank AS and ISS AS 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 ISS AS are associated (or correlated) with Danske Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Danske Bank AS has no effect on the direction of ISS AS i.e., ISS AS and Danske Bank go up and down completely randomly.

Pair Corralation between ISS AS and Danske Bank

Assuming the 90 days trading horizon ISS AS is expected to generate 1.16 times more return on investment than Danske Bank. However, ISS AS is 1.16 times more volatile than Danske Bank AS. It trades about 0.04 of its potential returns per unit of risk. Danske Bank AS is currently generating about -0.05 per unit of risk. If you would invest  12,460  in ISS AS on September 1, 2024 and sell it today you would earn a total of  340.00  from holding ISS AS or generate 2.73% return on investment over 90 days.

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

ISS AS  vs.  Danske Bank AS

ISS AS

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ISS AS are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, ISS AS is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Danske Bank AS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Danske Bank AS has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Pair Trading with ISS AS and Danske Bank

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

The idea behind ISS AS and Danske Bank 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.