Correlation Between Vestjysk Bank and HusCompagniet

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

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

Diversification Opportunities for Vestjysk Bank and HusCompagniet

0.71

Correlation Coefficient

Vestjysk Bank  HusCompagniet

Poor diversification

The 3 months correlation between Vestjysk and HusCompagniet is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Vestjysk Bank AS and HusCompagniet AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HusCompagniet AS and Vestjysk 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 Vestjysk Bank AS are associated (or correlated) with HusCompagniet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HusCompagniet AS has no effect on the direction of Vestjysk Bank i.e., Vestjysk Bank and HusCompagniet go up and down completely randomly.

Pair Corralation between Vestjysk Bank and HusCompagniet

Assuming the 90 days trading horizon Vestjysk Bank AS is expected to generate about the same return on investment as HusCompagniet AS. But, Vestjysk Bank AS is 2.84 times less risky than HusCompagniet. It trades about -0.12 of its potential returns per unit of risk. HusCompagniet AS is currently generating about -0.04 per unit of risk. If you would invest  6,220  in HusCompagniet AS on September 13, 2024 and sell it today you would lose (380.00) from holding HusCompagniet AS or give up 6.11% of portfolio value over 90 days.

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

Vestjysk Bank AS  vs.  HusCompagniet AS

Vestjysk Bank AS

Risk-Adjusted Performance

0 of 100

Very Weak

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

HusCompagniet AS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HusCompagniet AS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, HusCompagniet is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Vestjysk Bank and HusCompagniet

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

The idea behind Vestjysk Bank AS and HusCompagniet 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.