Correlation Between Moens Bank and Fynske Bank

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

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

Diversification Opportunities for Moens Bank and Fynske Bank

0.3

Correlation Coefficient

Moens Bank  Fynske Bank

Weak diversification

The 3 months correlation between Moens and Fynske is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Moens Bank AS and Fynske Bank AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fynske Bank AS and Moens 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 Moens Bank AS are associated (or correlated) with Fynske Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fynske Bank AS has no effect on the direction of Moens Bank i.e., Moens Bank and Fynske Bank go up and down completely randomly.

Pair Corralation between Moens Bank and Fynske Bank

Assuming the 90 days trading horizon Moens Bank is expected to generate 1.94 times less return on investment than Fynske Bank. But when comparing it to its historical volatility, Moens Bank AS is 1.48 times less risky than Fynske Bank. It trades about 0.06 of its potential returns per unit of risk. Fynske Bank AS is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  16,000  in Fynske Bank AS on January 24, 2024 and sell it today you would earn a total of  400.00  from holding Fynske Bank AS or generate 2.5% return on investment over 90 days.

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

Moens Bank AS  vs.  Fynske Bank AS

Moens Bank AS

Risk-Adjusted Performance

6 of 100

OK

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

Fynske Bank AS

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Fynske Bank AS are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound forward-looking signals, Fynske Bank is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Moens Bank and Fynske Bank

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

The idea behind Moens Bank AS and Fynske 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.

Check out your portfolio center.

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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.