Correlation Between Laan Spar and Skjern Bank

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

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

Diversification Opportunities for Laan Spar and Skjern Bank

0.55

Correlation Coefficient

Laan Spar  Skjern Bank

Very weak diversification

The 3 months correlation between Laan and Skjern is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Laan Spar Bank and Skjern Bank AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Skjern Bank AS and Laan Spar 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 Laan Spar Bank are associated (or correlated) with Skjern Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Skjern Bank AS has no effect on the direction of Laan Spar i.e., Laan Spar and Skjern Bank go up and down completely randomly.

Pair Corralation between Laan Spar and Skjern Bank

Assuming the 90 days trading horizon Laan Spar Bank is expected to generate 0.68 times more return on investment than Skjern Bank. However, Laan Spar Bank is 1.48 times less risky than Skjern Bank. It trades about 0.13 of its potential returns per unit of risk. Skjern Bank AS is currently generating about 0.01 per unit of risk. If you would invest  69,500  in Laan Spar Bank on January 20, 2024 and sell it today you would earn a total of  1,500  from holding Laan Spar Bank or generate 2.16% return on investment over 90 days.

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

Laan Spar Bank  vs.  Skjern Bank AS

Laan Spar Bank

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Laan Spar Bank are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Laan Spar may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Skjern Bank AS

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Skjern Bank AS are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Skjern Bank may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with Laan Spar and Skjern Bank

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

The idea behind Laan Spar Bank and Skjern Bank 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .