Correlation Between Sydbank AS and Orphazyme

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

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

Diversification Opportunities for Sydbank AS and Orphazyme

-0.43

Correlation Coefficient

Sydbank AS  Orphazyme

Very good diversification

The 3 months correlation between Sydbank and Orphazyme is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Sydbank AS and Orphazyme AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Orphazyme AS 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 Orphazyme. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Orphazyme AS has no effect on the direction of Sydbank AS i.e., Sydbank AS and Orphazyme go up and down completely randomly.

Pair Corralation between Sydbank AS and Orphazyme

Assuming the 90 days trading horizon Sydbank AS is expected to generate 3.04 times less return on investment than Orphazyme. But when comparing it to its historical volatility, Sydbank AS is 3.08 times less risky than Orphazyme. It trades about 0.07 of its potential returns per unit of risk. Orphazyme AS is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  84,890  in Orphazyme AS on September 5, 2024 and sell it today you would earn a total of  12,110  from holding Orphazyme AS or generate 14.27% return on investment over 90 days.

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

Sydbank AS  vs.  Orphazyme AS

Sydbank AS

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sydbank AS are ranked lower than 5 (%) 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.

Orphazyme AS

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Orphazyme AS are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating fundamental indicators, Orphazyme exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sydbank AS and Orphazyme

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

The idea behind Sydbank AS and Orphazyme 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.