Correlation Between Vestjysk Bank and Sparekassen Sjaelland

Can any of the company-specific risk be diversified away by investing in both Vestjysk Bank and Sparekassen Sjaelland 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 Sparekassen Sjaelland 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 Sparekassen Sjaelland Fyn AS, you can compare the effects of market volatilities on Vestjysk Bank and Sparekassen Sjaelland 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 Sparekassen Sjaelland. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vestjysk Bank and Sparekassen Sjaelland.

Diversification Opportunities for Vestjysk Bank and Sparekassen Sjaelland

0.04

Correlation Coefficient

Vestjysk Bank  Sparekassen Sjaelland

Significant diversification

The 3 months correlation between Vestjysk and Sparekassen is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Vestjysk Bank AS and Sparekassen Sjaelland Fyn AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sparekassen Sjaelland 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 Sparekassen Sjaelland. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sparekassen Sjaelland has no effect on the direction of Vestjysk Bank i.e., Vestjysk Bank and Sparekassen Sjaelland go up and down completely randomly.

Pair Corralation between Vestjysk Bank and Sparekassen Sjaelland

Assuming the 90 days trading horizon Vestjysk Bank AS is expected to under-perform the Sparekassen Sjaelland. But the stock apears to be less risky and, when comparing its historical volatility, Vestjysk Bank AS is 1.54 times less risky than Sparekassen Sjaelland. The stock trades about -0.09 of its potential returns per unit of risk. The Sparekassen Sjaelland Fyn AS is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  21,250  in Sparekassen Sjaelland Fyn AS on September 12, 2024 and sell it today you would earn a total of  1,250  from holding Sparekassen Sjaelland Fyn AS or generate 5.88% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

Vestjysk Bank AS  vs.  Sparekassen Sjaelland Fyn 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.

Sparekassen Sjaelland

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sparekassen Sjaelland Fyn AS are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong forward-looking signals, Sparekassen Sjaelland is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Vestjysk Bank and Sparekassen Sjaelland

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

The idea behind Vestjysk Bank AS and Sparekassen Sjaelland Fyn 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.