Correlation Between Sydbank AS and Danske Invest

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

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

Diversification Opportunities for Sydbank AS and Danske Invest

0.4

Correlation Coefficient

Sydbank AS  Danske Invest

Very weak diversification

The 3 months correlation between Sydbank and Danske is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Sydbank AS and Danske Invest Euro in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Danske Invest Euro and Sydbank 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 Sydbank AS are associated (or correlated) with Danske Invest. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Danske Invest Euro has no effect on the direction of Sydbank AS i.e., Sydbank AS and Danske Invest go up and down completely randomly.

Pair Corralation between Sydbank AS and Danske Invest

Assuming the 90 days trading horizon Sydbank AS is expected to generate 8.36 times more return on investment than Danske Invest. However, Sydbank AS is 8.36 times more volatile than Danske Invest Euro. It trades about 0.04 of its potential returns per unit of risk. Danske Invest Euro is currently generating about 0.23 per unit of risk. If you would invest  33,980  in Sydbank AS on September 4, 2024 and sell it today you would earn a total of  1,040  from holding Sydbank AS or generate 3.06% return on investment over 90 days.

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

Sydbank AS  vs.  Danske Invest Euro

Sydbank AS

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Sydbank AS are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Sydbank AS is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Danske Invest Euro

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Danske Invest Euro are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical and fundamental indicators, Danske Invest is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Sydbank AS and Danske Invest

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

The idea behind Sydbank AS and Danske Invest Euro 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.