Correlation Between Nordfyns Bank and Moens Bank

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

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

Diversification Opportunities for Nordfyns Bank and Moens Bank

0.73

Correlation Coefficient

Nordfyns Bank  Moens Bank

Poor diversification

The 3 months correlation between Nordfyns and Moens is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Nordfyns Bank AS and Moens Bank AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Moens Bank AS and Nordfyns 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 Nordfyns Bank AS are associated (or correlated) with Moens Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Moens Bank AS has no effect on the direction of Nordfyns Bank i.e., Nordfyns Bank and Moens Bank go up and down completely randomly.

Pair Corralation between Nordfyns Bank and Moens Bank

Assuming the 90 days trading horizon Nordfyns Bank AS is expected to generate 1.34 times more return on investment than Moens Bank. However, Nordfyns Bank is 1.34 times more volatile than Moens Bank AS. It trades about 0.13 of its potential returns per unit of risk. Moens Bank AS is currently generating about 0.12 per unit of risk. If you would invest  31,000  in Nordfyns Bank AS on February 14, 2024 and sell it today you would earn a total of  4,000  from holding Nordfyns Bank AS or generate 12.9% return on investment over 90 days.

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

Nordfyns Bank AS  vs.  Moens Bank AS

Nordfyns Bank AS

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nordfyns Bank AS are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Nordfyns Bank displayed solid returns over the last few months and may actually be approaching a breakup point.

Moens Bank AS

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Moens Bank AS are ranked lower than 9 (%) 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 June 2024.

Pair Trading with Nordfyns Bank and Moens Bank

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

The idea behind Nordfyns Bank AS and Moens 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 Transaction History module to view history of all your transactions and understand their impact on performance.