Correlation Between Moens Bank and Kreditbanken

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

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

Diversification Opportunities for Moens Bank and Kreditbanken

-0.11

Correlation Coefficient

Moens Bank  Kreditbanken

Good diversification

The 3 months correlation between Moens and Kreditbanken is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Moens Bank AS and Kreditbanken AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kreditbanken AS and Moens 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 Moens Bank AS are associated (or correlated) with Kreditbanken. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kreditbanken AS has no effect on the direction of Moens Bank i.e., Moens Bank and Kreditbanken go up and down completely randomly.

Pair Corralation between Moens Bank and Kreditbanken

Assuming the 90 days trading horizon Moens Bank AS is expected to under-perform the Kreditbanken. In addition to that, Moens Bank is 1.01 times more volatile than Kreditbanken AS. It trades about -0.08 of its total potential returns per unit of risk. Kreditbanken AS is currently generating about -0.01 per unit of volatility. If you would invest  505,000  in Kreditbanken AS on September 3, 2024 and sell it today you would lose (5,000) from holding Kreditbanken AS or give up 0.99% of portfolio value over 90 days.

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

Moens Bank AS  vs.  Kreditbanken AS

Moens Bank AS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Moens Bank AS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Moens Bank is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Kreditbanken AS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kreditbanken AS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, Kreditbanken is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Moens Bank and Kreditbanken

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

The idea behind Moens Bank AS and Kreditbanken 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.