Correlation Between Sydbank AS and Orsted AS

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

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

Diversification Opportunities for Sydbank AS and Orsted AS

-0.67

Correlation Coefficient

Sydbank AS  Orsted AS

Excellent diversification

The 3 months correlation between Sydbank and Orsted is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Sydbank AS and Orsted AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Orsted 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 Orsted AS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Orsted AS has no effect on the direction of Sydbank AS i.e., Sydbank AS and Orsted AS go up and down completely randomly.

Pair Corralation between Sydbank AS and Orsted AS

Assuming the 90 days trading horizon Sydbank AS is expected to generate 1.15 times less return on investment than Orsted AS. But when comparing it to its historical volatility, Sydbank AS is 2.03 times less risky than Orsted AS. It trades about 0.02 of its potential returns per unit of risk. Orsted AS is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  39,200  in Orsted AS on September 1, 2024 and sell it today you would lose (20.00) from holding Orsted AS or give up 0.05% of portfolio value over 90 days.

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

Sydbank AS  vs.  Orsted AS

Sydbank AS

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sydbank AS are ranked lower than 1 (%) 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.

Orsted AS

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Orsted AS are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Orsted AS is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Sydbank AS and Orsted AS

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

The idea behind Sydbank AS and Orsted 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.