Correlation Between Groenlandsbanken and SKAGEN Global

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

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

Diversification Opportunities for Groenlandsbanken and SKAGEN Global

-0.23

Correlation Coefficient

Groenlandsbanken  SKAGEN Global

Very good diversification

The 3 months correlation between Groenlandsbanken and SKAGEN is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Groenlandsbanken AS and SKAGEN Global A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SKAGEN Global A and Groenlandsbanken 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 Groenlandsbanken AS are associated (or correlated) with SKAGEN Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SKAGEN Global A has no effect on the direction of Groenlandsbanken i.e., Groenlandsbanken and SKAGEN Global go up and down completely randomly.

Pair Corralation between Groenlandsbanken and SKAGEN Global

Assuming the 90 days trading horizon Groenlandsbanken AS is expected to generate 0.74 times more return on investment than SKAGEN Global. However, Groenlandsbanken AS is 1.35 times less risky than SKAGEN Global. It trades about -0.06 of its potential returns per unit of risk. SKAGEN Global A is currently generating about -0.22 per unit of risk. If you would invest  65,000  in Groenlandsbanken AS on January 29, 2024 and sell it today you would lose (500.00) from holding Groenlandsbanken AS or give up 0.77% of portfolio value over 90 days.

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

Groenlandsbanken AS  vs.  SKAGEN Global A

Groenlandsbanken

Risk-Adjusted Performance

0 of 100

Very Weak

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

SKAGEN Global A

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in SKAGEN Global A are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong essential indicators, SKAGEN Global is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Groenlandsbanken and SKAGEN Global

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

The idea behind Groenlandsbanken AS and SKAGEN Global A 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.